negative consequences on the ability to achieve stable inflation with low output costs in the future. perhaps the main apprehension of policymakers in tightening monetary policy is the fear of further appreciation of their currencies. as monetary policy in advanced economies is expected to remain very expansionary for a prolonged period of time, many emes that have been tightening monetary policy have also experienced appreciation of their currencies. not dealing with inflationary pressures in a timely manner, however, could result in economic overheating and rising inflation. most emerging markets have enjoyed great success from trade openness and export - led growth, and hence their worries arising from exchange rate appreciation are well justified. however, it is important to distinguish between real appreciation – the relevant variable from bis central bankers ’ speeches the competitiveness standpoint – and nominal appreciation. exchange rate actions that attempt to mitigate a real exchange rate appreciation will have only transitory effects, which could provide valuable time for the economy to adjust to a new global environment and might hence be relevant from the point of view of welfare, but cannot be thought of as a permanent tool to foster competitiveness. in order to sustain the real exchange rate, real actions need to be taken, such as increasing domestic savings. it is time to rebuild fiscal buffers in emerging market economies and accelerate the pace of reforms to achieve productivity gains that can sustain competitiveness. it is important to note that the economic strength of emes relative to advanced economies is the main reason why their real exchange rates are appreciating. in addition, the correction of global imbalances requires both an increase in consumption in surplus economies and a shift of this greater demand towards goods produced by advanced economies, especially since in the latter growth of domestic demand will be sluggish because of the post - crisis deleveraging process. relative price adjustments around the world should help this process. many emes have been trying to mitigate the appreciation through exchange rate intervention, with partial success. chile is one of the latest to join this group. others have sought the use of capital controls or macro - prudential regulations, not only for exchange rate reasons, but also to avoid the buildup of excessive market or liquidity risk associated to the foreign exchange position. in january this year we announced a program of reserves accumulation of 12 billion dollars, about 5 percent of gdp. this measure had a dual purpose. on the one hand, it would relieve some pressures on the exchange rate, facilitating the adjustment of the economy

jerome h powell : semiannual monetary policy report to the congress testimony by mr jerome h powell, chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington dc, 16 june 2020. * * * chairman crapo, ranking member brown, and other members of the committee, thank you for the opportunity to present the federal reserve ’ s semiannual monetary policy report. our country continues to face a difficult and challenging time, as the pandemic is causing tremendous hardship here in the united states and around the world. the coronavirus outbreak is, first and foremost, a public health crisis. the most important response has come from our health - care workers. on behalf of the federal reserve, i want to express our sincere gratitude to these dedicated individuals who put themselves at risk, day after day, in service to others and to our nation. current economic situation and outlook beginning in mid - march, economic activity fell at an unprecedented speed in response to the outbreak of the virus and the measures taken to control its spread. even after the unexpectedly positive may employment report, nearly 20 million jobs have been lost on net since february, and the reported unemployment rate has risen about 10 percentage points, to 13. 3 percent. the decline in real gross domestic product ( gdp ) this quarter is likely to be the most severe on record. the burden of the downturn has not fallen equally on all americans. instead, those least able to withstand the downturn have been affected most. as discussed in the june monetary policy report, low - income households have experienced, by far, the sharpest drop in employment, while job losses of african americans, hispanics, and women have been greater than that of other groups. if not contained and reversed, the downturn could further widen gaps in economic well - being that the long expansion had made some progress in closing. recently, some indicators have pointed to a stabilization, and in some areas a modest rebound, in economic activity. with an easing of restrictions on mobility and commerce and the extension of federal loans and grants, some businesses are opening up, while stimulus checks and unemployment benefits are supporting household incomes and spending. as a result, employment moved higher in may. that said, the levels of output and employment remain far below their pre - pandemic levels, and significant uncertainty remains about the timing and strength of the recovery. much of that economic uncertainty comes from uncertainty about the path