firms needing to renegotiate their liabilities. our estimates, however, suggest that a deterioration in activity would have a greater impact on firms ’ financial strength than would an increase in financial expenses. household risk indicators remain fairly stable, in line with the gradual adjustment of the labor market. aggregate household indebtedness continues to increase because of a higher share of mortgage loans. the lower interest rates seen up to september helped to maintain the aggregate financial burden relatively stable around 15 % ( figure 15 ). at the same time, delinquency in both consumer and mortgage loans remained bounded with no major variation from the previous half. some exceptions include consumer loans granted by clearing and family allowance houses and bank mortgage credits in the northern regions, where credit quality has fallen. thus, one risk identified in the fs report is that a worsening of labor indicators could hinder the repayment capacity of households. turning to the real estate sector, both housing prices and mortgage credit have moderated their growth rates. several housing price indicators posted lower growth rates than in previous quarters, reflecting the dynamics of their components ( figure 16 ). data from real estate companies reporting to the sbif show no increase in withdrawal rates at the third quarter of 2016. it is worth noting, however, that this risk persists because a large part of 6 / 19 bis central bankers'speeches promised projects in 2015 were due to be delivered between the last quarter of 2016 and the year 2017. lately, there has been an increase in the down payment required by the banks to grant a mortgage loan, which could result in more withdrawn promises by those households that were unable to meet the necessary savings to comply. profitability of the banking system has dropped, as interest spreads have reduced their contribution. this can be explained by a change in composition of the credit portfolio towards lower relative return products — fewer consumer and more mortgage loans — and by the migration towards less risky clients, who are offered lower interest rates. at the same time, the capitalizations of the first half of 2016 drove up the banking system ’ s capital adequacy ratios ( car ), strengthening their position to deal with adverse economic scenarios. in fact, stress tests indicate that banks have the sufficient capital to face severely stressful conditions. all in all, capital gaps are similar to those in comparable countries. although several capital increases have been made lately, no changes in banks ’ dividend withholding policies have been observed that would allow increasing the capital base endogen

the lower part of the tolerance range, to start converging back to the target by year ’ s end. domestic activity has also shown some surprises. it grew in line with forecasts in the third quarter and even somewhat better in sectors not related with natural resources — what we call other gdp. however, it began the fourth quarter quite poorly. the decline in mining activity weighed significantly, as has been the trend throughout the year, and so did some specific industry lines. however, the lower dynamism estimated for the last quarter of the year leads us to expect that 2016 growth will be in the lower bound of the range projected in september. going forward, we estimate that the economy will return to near - potential expansion rates towards the end of 2017, although at a somewhat slower pace than we estimated in september. abroad, the biggest news has been the changes in financial markets after the us election. the movements that followed took a toll on financial conditions, despite that they are still 1 / 19 bis central bankers'speeches expansionary from a historical standpoint. last week the federal reserve raised the policy rate for the second time, a decision that was widely expected by the markets. the surprise was the confirmation of a slightly faster withdrawal of the monetary stimulus, which has shaken the financial markets in recent days. as for activity and inflation, they continue to show advances in the developed world, while they are tending to stabilize in the main emerging economies. we see some improvement in the terms of trade in the near future. considering all the above and its effects on the medium - term outlook, the baseline scenario of this mp report has revised the 2017 inflation trajectory from september downward. this is because core inflation — what we call the cpiefe ( i. e. excluding foods and energy ) — is expected to drop significantly, due to the important weight in inflation of import - related prices. the normally more persistent services inflation will also fall, although considering the basis of comparison effect, the impact of lower inflation on indexed prices and its own inertia. all this in a context where, despite some widening, the output gaps are still bounded and the expected external impulse facing the chilean economy over the next two years shows no big change from september. still, beyond these changed projections, what merits the most attention is that the range of risks has increased. in this context, in our latest monetary policy meetings we have held the monetary policy interest rate ( mpr ) unchanged at 3. 5 %. at the