’ financial costs and arbitrage conditions, which could end up undoing the direct effects. at the same time, repeated or frequent interventions lose effectiveness : it is essential for intervention to be an exceptional occurrence in order to transmit the relevant information to financial markets. nevertheless, it is a valid tool, effective in changing the exchange rate and strengthening the international liquidity position. the board of the central bank of chile constantly evaluates the timing and the size of any intervention and in the past few weeks it has certainly been present in our discussions, based on weighing the benefits, costs and the present context. in the central bank of chile we use a variety of methods for assessing the real exchange rate level with regard to its long - term fundamentals and thus we have an ample range of estimates. our aim is not to determine which is the equilibrium – that is the task of the market –, but rather to detect any anomalous deviation. these discussions led us to the conclusion in our latest monetary policy report that the real exchange rate is within the adequate range of levels, albeit in the lower part of it, and this is confirmed by the most recent appreciation. the real exchange rate is currently slightly below its average over the past twenty years but, with respect to said period, terms of trade, even excluding copper, are today much better. similarly, our economy is enjoying a much easier net external position – that is, how much we owe and how much is owed to us by the rest of the world – than in the 1980s and 1990s and the real exchange rate has only appreciated slightly over what it was then. since the floating exchange rate was adopted, there have been three occasions on which the board considered that intervention was warranted. in general, these interventions affected the exchange rate. other episodes, that showed how difficult it is to apply an effective intervention, were experienced in the 1990s, when the real exchange rate was significantly more appreciated that it is today, despite worse terms of trade, a weaker net external position, massive purchases of foreign currency reserves and restrictions on capital inflows. in emerging and industrialized economies that have successfully weathered the crisis, export activity today faces considerable challenges. the financial crisis and the great recession have had profound consequences on the developed world because of their financial excesses. in this sense, they are facing a situation similar to what we lived through in the mid - 1980s, only now the adjustments they make locally have global implications. current account deficits in the advanced world

looked like it was building, it had not strengthened sufficiently by the time of the july meeting to warrant action. in august the case got weaker, and it got weaker again by early september. essentially what happened was that the risks to growth from abroad abated, while those posed by the rapid rise in debt did not. this recent experience, and the one a year earlier, is instructive in the discussion about central bank communication. what it shows is that, while it is natural for market participants and the media to want central banks to say more and more about their intentions, people need to keep very much in mind that our assessment of what we might need to do is, of necessity, highly conditional on a view of the future. and the future often turns up the unexpected - to which we need to respond by revising our intentions. so it is important that observers not only listen to the central bank ’ s words, but also continue to look closely at the actual information coming in. i know the majority of you do. secondly, because the future cannot be known, and because things can change quickly, people need some understanding of the principles which guide central bank behaviour. so there is probably more to be gained by continued efforts at articulating how our framework for policy works, than by providing ever more frequent commentary on events. such information hopefully provides interested observers with a device to filter, in real time, the information becoming available. this, combined with a periodic account, after the event, of how we filtered it, is the most helpful form of transparency - describing how we think about things and, within that framework, why we did what we did. the most recent statement on monetary policy, in fact, goes a good deal further down this track than most of its predecessors. conclusion the world economy is still not entirely in the clear, but is better than it was, and a fair bit better than it might have been. it is sensible at present to look for further improvement, while keeping in mind the possibility of regression. if things work out acceptably well abroad, the australian economy will next year have a better chance of balanced growth than we have had for a few years. we will continue to assess the evolving balance of risks and will respond, in a measured fashion, as needed - and we ’ ll do our best to keep you informed.