In the euro area, where banks are dominant, interventions were designed to ensure that adequate liquidity would flow into the system without obstacles or restrictions. It has become commonplace to talk about those measures as "unconventional" and, indeed, they are. The important point, however, is that they do not substitute, but complement "conventional" movements in policy rates and can be implemented in parallel. In other words, there is no need to wait for policy rates to reach zero (or any "lower bound") to innovate in the design and implementation of monetary policy. For the Euro area, the most important shift took place in October 2008, when the Governing Council decided to allocate liquidity to banks in unlimited amounts at the policy rate. Although it was not advertised as such at the time, this apparently technical measure deeply transformed the policy framework and marked the move into unconventional territory. •  Third, those interventions have been remarkably cooperative and convergent. The largest coordinated reduction in interest rates in history took place on 8 October 2008 with the participation of seven major central banks. A dense network of bilateral swap agreements has insured that liquidity shortages in international banking and financial markets can be addressed speedily and efficiently. Finally, as the crisis triggered a synchronized slowdown in activity and inflation worldwide, monetary policy rates have  2  BIS Review 85/2009  converged to low and comparable levels. Remaining differences can be explained by slight differences in economic prospects and financial systems.

It is worth noting that the Board of the Central Bank of Chile believes that the risk of an even weaker performance of the world economy is still latent and is more likely to occur than is a more optimistic scenario. A lasting recuperation of the developed world calls for a reduction in the current-account deficits accumulated before the crisis. Some advanced economies like the U.S. must reduce their trade imbalances, but their possibility of basing growth on their external sectors is limited. In the Eurozone, the rigidities associated to the common currency slow the exchange rate adjustment inside the region. In China, high savings and exchange rate interventions lock the parities’ adjustments. At the national level, third-quarter figures for output and demand continued to show strong dynamism, although with some deceleration compared with the first half (figure 5). In that quarter, GDP rose 7% annually, with a velocity of 8.1%. In aggregate, third-quarter output was in line with the baseline scenario we had foreseen in September, but with a different composition both on the output side and on the expenditures side. From the expenditures standpoint, it is worth mentioning the moderation of the durable components of demand – i.e., purchases of durable goods and investment in machinery & equipment – with respect to indicators for the first half. Investment, although at a slower pace than forecast in September, continued to expand during the third quarter, driven by imports of machinery & equipment. Meanwhile, non-durable private consumption outperformed expectations again.