The challenge is to learn how to use these instruments in the best way.” Recently, Petra M. Geraats (Mаy 2010), concluded in the same direction: “Recent financial crises have revealed that a ‘nice’ (non-inflationary, continuously expanding) economy can mask the build up of toxic imbalances that threaten the financial system. So it is vital for policymakers to proactively pursue not only price but also financial stability. Although the pursuit of both objectives could give rise to uncomfortable trade-offs, these can be bypassed by supplementing the main instrument of monetary policy, with tools for prudential policy, in line with the Tinbergen rule.” Accordingly, asking whether the central banks should have double mandate and answering affirmatively, she (Petra M. Geraats) says: “Although the twin goals sometimes give rise to dueling demands, with an appropriate policy framework central banks can accomplish both and achieve a dual mandate of price and financial stability”. Definitely, the consensus for this point of view is mounting, since larger number of authors are basically on the same line. Тhis highlights the importance of ongoing efforts to strengthen the macro-prudential supervision role of central banks (de Larosiere, 2009). Macro-prudential policies could aim to contain the build up of financial imbalances and ensure that the financial system is sufficiently resistant to withstand a disorderly unwinding (Papademos, 2009). Considering the important informational synergies between micro-prudential supervision and systemic risk analysis, bringing micro-supervision under the same roof as other central bank functions seems an attractive proposition.

The real exchange rate (RER) has also dropped in the past few months, and is now at 94 using the 1986=100 index, which puts it on its average of the past fifteen years. While this figure is consistent with the estimated long-term RER, the cyclical conditions of the economy point to a level somewhat above its current values. For this reason, the baseline scenario uses as a working assumption that the RER will have a slight depreciation in the projection horizon (figure 7). The widening of output gaps will also help in the process of inflation convergence. They are still relatively bounded, however, and inflation’s elasticity to the output gap is low. Thus, at least in the context of slow growth and a gradually adjusting labor market, no fast reductions are expected in core inflation as a result of this factor. Chile’s economic slowdown cycle of recent years is associated with several elements. The end of the commodity super-cycle has resulted in a fall in mining investment and production. The world economy has not rebounded as expected, global financial conditions facing emerging economies have tightened and local confidence levels have remained pessimistic for quite some time. This scenario has prompted a major change in relative prices. Since indexation is still high, for the economy to adjust gradually, exchange rate flexibility is needed together with domestic financial conditions aligned with the new scenario. The Central Bank has contributed to this adjustment with an expansionary monetary policy and accommodating a sharp depreciation of the peso.