installed capacity utilization has declined accordingly. domestic demand slowed down further in the second quarter. final demand, however, which excludes inventories, continued to grow at the same pace of the first quarter. gross fixed capital formation posted y - o - y expansion flat from the first quarter of this year, but below the figures of the second half of 2012. as has been noted before, this slowdown owes mainly to the maturing of mining investments after three years largely outperforming gdp. also in an external context where the copper price has dropped and moderating expectations for growth around the world but especially in china, which call for more caution when evaluating investment decisions. on the other hand, private consumption was more dynamic, especially in its non - durable component, while durables remained high. labor market conditions have continued to tighten, but are still the main driver of this component. nominal and real wages have moderated their annual variation, while the unemployment rate remains near all - time lows. again, unlike previous cycles, credit growth has accompanied private income, but has not been the main determinant of household spending. this last quarter saw a significant depletion of inventories, reversing the opposite trend seen in the first quarter of the year, due to, among other factors, the effects of the port strike. as forecast, cpi inflation has returned to the tolerance range, as the temporary factors that affected it have eased ( figure 3 ). in particular, the prices of electricity and gasoline rose, the former due to the end of price recalculations, the latter because of world prices and, to a lesser extent, the exchange rate depreciation. yet the core measure – cpiefe, which excludes foods and energy – has remained near 1 % annually, affected by the persistent bis central bankers ’ speeches negative incidence of the goods component. inflation expectations two years ahead remain close to 3 % annually. although the board has held the mpr constant, there have been variations in domestic interest rates and the real exchange rate that smooth the economy ’ s adjustment to a scenario of lower external impulse and less pressures on internal resources. market interest rates have dropped in the year so far. the real exchange rate ( rer ) has depreciated, approaching its average of the past 15 to 20 years, and is believed to be within the range consistent with its long - term fundamentals ( figure 4 ). the baseline scenario assumes that chile ’ s gdp will grow

this framework combines bank - specific measures with macro prudential actions to contain potential systemic risk. in this respect, one of the new tools is the countercyclical capital buffer : an additional capital requirement that could be activated and deactivated by the central bank depending on the state of the financial cycle, and whose main goal is to preclude the incubation of systemic risks and increase the resilience of the system as a whole. still, there are a few challenges ahead that we need to address to have an even more robust financial system. in particular, two tasks seem more urgent than others. namely, resolution of financial institutions and deposit insurance. while the new banking law includes some provisions in this respect, by introducing stronger early - intervention measures, these need to be further based on agosin et al. ( 1999 ) and espinosa and fernandez ( 2015 ). page 4 of 5 central bank of chile march 2019 developed to provide a comprehensive framework to deal with banks in trouble or on the brink of insolvency. once the preparatory phase of the general banking law, including a unified supervisor, is fully completed, we hope that the central bank and the government can advance in drafting a legal proposal on these issues. certainly, these areas will be important points in the imf ’ s financial sector assessment program ( fsap ) update of 2020, and it is important that we get there with the job well advanced. acknowledgements finally, allow me to thank the presenters for sharing their interesting research insights here with us in santiago. i also thank the organizers from the central bank of chile and the iadb in putting together this rich agenda from which we will certainly distill conclusions to guide our work forward. in particular, i would like to thank alejandro jara, markus kirchner, andres fernandez, victoria nuguer, and liliana rojas - suarez for setting up the agenda, and to tomas gomez, paloma navarro and maria jose reyes for the excellent organization of the event. i wish everyone a very fruitful discussion and a pleasant stay in santiago. * * * references espinosa, c. and j. fernandez ( 2015 ). “ comparacion historica de resultados en el sector corporativo en chile ”. economia chilena, vol. 18, no. 1. agosin, m., g. crespi, and l. letelier ( 1999 ). " explanations for the