The recent trend has reflected a number of specific and transient influences, such as the high basis for comparison of the same months of 2012, the appreciation of the peso, the normalization of previous shocks to the prices of some perishables, and the stamp tax reduction. These effects have also been expressed through indexation mechanisms and expectations, and in the moderate services inflation rates despite strong demand and tight domestic markets. Other more lasting effects cannot be ruled out, such as the observed increase in productivity or the reduction in trade margins. In any case, the procyclical behavior of these elements leads to conclude that the medium-term inflationary risks associated to the intensity of use of installed capacity are still present. However, it is worth noting that private expectations one and two years out remain anchored around 3%. Internationally, the outlook of slow growth in developed economies is maintained, but with some improvements. In the U.S. there are signs that private spending is gaining momentum, but growth prospects remain bounded because of the need for further fiscal adjustments. The Eurozone is still in recession and its recovery is being held back by the need to advance towards fiscal consolidation, persistent problems in the financial systems and the difficulty in making the necessary relative-price adjustments within the region. Plus the political difficulties to implement reforms that would allow raising trend growth rates. The emerging world continues to exhibit higher growth rates, although its performance has been more mixed.

Earlier episodes of balance of payments crises have typically been associated with high debt and liquidity and currency mismatches, which leave economies vulnerable to abrupt deterioration of international financial conditions. In Chile, the present current account deficit is being financed mainly by FDI flows, associated with reinvested earnings and new investments, thus providing more strength to the capital account. Despite these factors, we need to remain vigilant because an economic scenario like the present one can favor the incubation of future risks. Domestically, a scenario of very dynamic final sales and personal income, low unemployment and high utilization of installed capacity,  BIS central bankers’ speeches  1  can exacerbate the response of domestic demand and further expand the current account deficit. Abroad, the present abundance of international funding as a result of expansionary monetary policies in developed economies may facilitate the financing of the external deficit and push asset prices up, at the expense of incubating vulnerabilities for the future. All this means that we must be particularly alert to prevent financial vulnerabilities from incubating, since these situations can lead to higher leverage of households, firms and financial intermediaries, as well as currency and liquidity mismatches. In this regard, one reassuring element is that in recent months there has been a moderation in household indebtedness, which in any case has remained in line with the income trajectory. It is also important to continue to monitor the evolution of key financial prices and their interaction with lending.