Both the pattern of international fund flows and the underdeveloped state of the regional bond market require this. Fostering regional bond market development involves co-operation on a number of fronts among economies with very differing economic, political and cultural backgrounds. It is often said that the diversity of this region - in comparison with, say, Europe - is a considerable obstacle to the kind of financial, economic and monetary co-operation that might be desirable. Nevertheless, it is heartening that, in this area at least, considerable progress has been made over the past few years, particularly among central banks. This co-operation has taken two forms: market development initiatives, which help promote the growth of a regional bond market, and infrastructural initiatives, which facilitate that growth. Let me, in the remainder of this address, briefly outline some of these initiatives. A number of collaborative initiatives have been undertaken by central banks in the region to foster the development of both local and regional bond markets. These can be grouped into three main clusters, each falling under the auspices of a major regional multilateral organisation. The first of these is the APEC Initiative on the Development of Securitisation and Credit Guarantee Markets, which is being spearheaded by three APEC member economies (Hong Kong, Thailand and Korea) and sponsored by the World Bank. The aim of this initiative is to address structural impediments to the development of bond markets and to provide an effective and immediate solution to the credit gap problem.

The not so buoyant economy and the gradual decline in inflation-in line with expectationssuggest that, under the assumptions of the baseline scenario, the discussion about the gradual withdrawal of the monetary stimulus could be delayed with respect to March expectations. Overall, any future changes in the MPR will depend on the evolution of domestic and external macroeconomic conditions and their implications for the inflation outlook. Indeed, if inflation is higher and more unrelenting than we have foreseen, the normalization should be anticipated; but if the convergence of inflation to the target is faster than foreseen, the opposite should happen. Let me now present a brief review to the main issues in our Financial Stability Report. The Financial Stability Report Our Financial Stability Report discloses, on a half-yearly basis (in June and December), the recent macroeconomic and financial developments that might have an incidence on the Chilean economy’s financial stability. The Report we present today examines the same external risk scenarios I have just described. As I said, monetary policy in developed economies remains expansionary. The measures of the ECB and other central banks that cut down their benchmark rates have continued to push down sovereign long-term rates, although lately they have shown some reversal. This, 4  BIS central bankers’ speeches  plus still bounded risk premiums, have led to increased issue of debt, mainly corporate. Thus, an environment of low-cost funding and incentives to risk taking persists, where vulnerabilities may be incubating that could emerge as the global financial situation approaches normality.