the chinese economy has decelerated, with some weakness in the manufacturing sector. latin america faces a complex situation, particularly brazil which is going through its worst recession in decades. the loss of its investment grade last week reveals the difficulties of this economy. in argentina, the new authorities are facing great challenges. inflation in latin america, in contrast with the rest of the world, has increased, limiting the room for looser monetary policies ( table 2 ). in our baseline scenario, annual headline inflation stays above 4 percent for most of 2016, ending the year inside the tolerance range and hitting the target near the end of the projection horizon, now the fourth quarter of 2017. it is worth saying that inflation expectations remain anchored to the target over that horizon ( figure 6 ). this monetary policy report ’ s inflation forecast assumes that, over the policy horizon, output gaps will widen in the short term but will remain bounded, and the real exchange rate will appreciate slightly. the board already began withdrawing part of the monetary stimulus as announced in september, taking the mpr to 3. 5 percent. the baseline scenario uses as a methodological assumption that the policy rate trajectory will be as inferred from the various expectations bis central bankers ’ speeches indicators at the statistical cutoff date for this report ( figure 7 ). accordingly, monetary policy will continue to be expansionary, consistent with a context where growth remains below potential for some time and inflation converges with the target within the projection horizon. thus, the monetary policy rate in real terms will stay near zero for quite a while, placing itself as one of the most expansionary in the group of emerging economies ( figure 8 ). the baseline scenario reflects those events believed to be the most likely to occur with the information at hand at the closing of the reports. there are risks, however, that, if materialized, could reshape the macroeconomic outlook and thus alter the course of monetary policy. about the external scenario, it is still early to know how the policy rate increase in the united states will affect the global economy. a first look shows that the markets have taken it calmly, stock prices rose and the dollar lost some value against the other currencies. of course the way this process will unfold is an important source of risk, especially because of existing differences between what market expectations suggest and fed ’ s statement about how fast and how far it will raise the rate. plus there is divergence in the monetary policy among the developed countries and its

take time to clear. this will mean that in the two - year period 2012 – 2013 world growth will be slower than foreseen in september. we now anticipate a recession in the eurozone in 2012, based on the recent indicators of manufacturing output and expectations in the region. in the u. s., recent output indicators have been somewhat better than expected, but not so much as to modify the view that this economy will experience a long period of slow growth, but not a recession. political difficulties to agree on a gradual fiscal adjustment plan have increased the uncertainty about the performance of the u. s. economy. emerging economies will grow less than we thought in september, but still outperforming their developed counterparts. china ’ s gdp growth will slow down in 2012 – 2013, to 8. 2 % in 2012 and 8. 5 % in 2013. these figures, although high, are the lowest since 2001. all these data combined result in a forecast for world growth in 2012 and 2013, 0. 5 and 0. 4 percentage points less than assumed in september. the terms of trade will also drop from 2011. the scenario assumes a copper price averaging us $ 3. 5 / lb and us $ 3. 4 / lb in 2012 and 2013, respectively. the prices of oil and fuels will follow a downward trend ( table 1 ). the reduced external impulse assumed in the baseline scenario will translate into slower growth in chile than forecast in september. the main sources of this revision are the weak external demand affecting domestic activity, stringent international financial conditions and reduced terms of trade. in 2012, the chilean economy will grow in the 3. 75 % – 4. 75 % range, after growing 6. 2 % in 2011 ( table 2 ). in this scenario, headline inflation will drop to around bis central bankers ’ speeches 3 % in the first half of 2012, and will hover around that figure through the end of the projection horizon, this time the fourth quarter of 2013 ( figure 7 ). these projections use as a working assumption that the real exchange rate will be fairly unchanged over the next two years, based on our assessment of its current level, which is within the range that is thought to be consistent with its long - term fundamentals. the appreciation of the dollar in the global market has also affected the chilean peso. the peso / dollar parity has depreciated around 10 % between the statistical cutoff of this and the latest monetary policy report