the long3 term trajectory, but neither do they influence the dynamic of the business cycle. thus, we do not expect these events to have any material repercussion on the performance of other economic sectors or on inflation. in the case of mining production, although its impact on gdp of the first quarter is significant as it is determined mostly by supply - side factors, it is deleted from the other gdp calculation that the bank uses in its models to measure the activity gap and the medium - term inflation outlook. thus, the change in the projected range for 2017 — of half of one percentage point — responds to two major factors. on the one hand, about half is explained by escondida mining downtime and other incidents during the first quarter. on the other hand, the greater weakness we saw in the course of 2016 gives a lower starting point for the economy this year. in particular, because this weakness has been observed in sectors that tend to be more persistent in their dynamics, such as construction and associated areas. we must not forget that this sector received a significant boost in 2015, which lasted into early 2016, as a result of the new vat that would be charged to the sector under the tax reform. such reduced strength responds largely to the end of this boost. there is also the effect that the lending standards of mortgage loans have tightened too, given the higher down payment demanded by the banks. another important issue worth looking into are the changes in inventories over recent years. the year 2016 completed three years of inventory depletion, which is quite uncommon. in general, inventory movements reflect how companies predict the future : if they are optimistic about it, they accumulate, and vice - versa. recent years ’ relentless downward revisions to growth prospects have permeated companies ’ desired level of inventories and part of what we see in the 2017 growth outlook is also related to that. for 2018, the baseline scenario assumes that the economy will perform better than this year, growing in the 2. 25 % to 3. 25 % range. this will allow the activity gap to narrow steadily throughout next year, keeping in mind that the board still estimates our economy ’ s potential growth rate between 2. 5 % and 3 %, and trend growth at 3. 2 %. these projections assume that, after a three - year - long fall, gross fixed capital formation ( gfcf ) will post a slightly positive growth in 2017 and a clearly stronger expansion in 2018. this result will be

tolerate significant deviations of current inflation from the medium - term target but also to exercise a lot of judgment in assessing when deviations in expected inflation originated in the er justify a change in the policy stance. tolerance to er - induced deviations in inflation is easier the higher the credibility of monetary policy. if medium - term inflation expectations remain anchored at the policy target level, the central bank can count on economic agents to help convergence afterwards. building a record of credibility and reputation has been a product of a coordinated, persistent, and long - term commitment by the central bank of chile to the best practices on transparency and independence. a responsible and countercyclical fiscal stance is an absolute requirement for consistency of the overall macroeconomic framework. besides from softening cyclical fluctuations, fiscal credibility is an important ingredient of mp credibility, as it alleviates potential concerns of fiscal dominance behind mp decisions. finally, all of the above may need to rely on substantial financial buffers, like moderate levels of indebtedness by all major economic agents ; safe financial assets ( sovereign wealth funds ) ; well capitalized banks, and so on. so, building a reliable floating er regime able to cushion the domestic economy from financial and commodity shocks takes much more than courage and a statutory decision. it should be supported by a sophisticated financial and institutional architecture. this is not easy to capture in attributebased scoring systems. but, when this architecture is put in place and preserved over time, the floating er regime may be just the expression of a broader arrangement of institutions and policies. perhaps it is such arrangement, rather than the er policy itself, the factor that may really protect emes from major global shocks, but this is not material to the end result : substantial smoothing of external volatility over the local economy. finally, a greater convergence to the international standards on banking capital requirements defined by basel iii, especially for global banks, is among the macroprudential policies currently promoted to reduce the impacts of greater external volatility. thank you. * * *