in terms of its impact on local activity, the risk balance is downwards biased. the main risk is the possibility of a sharp deterioration of global financial conditions facing emerging economies. a significant part comes from the us economy, which is currently near or above full employment and inflation pressures that could trigger a more forceful reaction from the fed. special mention deserves the fiscal stimulus package recently approved by the us congress, which will put pressure on an economy where, as i just pointed out, gaps are already tight. 3 it is worth stressing that the deterioration that this would cause in the global financial conditions could have particularly severe consequences for those emerging economies with weaker fiscal or financial positions or that are highly indebted. china's situation is worrisome, as there are still several imbalances in its markets yet to be / this report includes a box analyzing the magnitude of the pass - through coefficient of exchange rate variations to inflation, identifying the origin of the variation and establishing that its effects on inflation change depending on the type of shock faced. in particular, it reviews how the inflationary effects of exchange rate fluctuations change depending on where they originate, e. g. in a movement of the global value of the dollar as opposed to an idiosyncratic shock hitting the chilean economy. the analysis finds that the inflationary impact of exchange rate movements associated with deviations of the interest rate parity is stronger and more persistent than if stemming from changes in foreign inflation. thus, the implications for monetary policy are obvious : not all exchange rate variations have the same inflationary consequences and, therefore, the policy rate response must factor in their origin. / this report includes a box reviewing the possible impacts of the us fiscal measures. the conclusion is that, in the context of an economy with scarce capacity gaps and highly indebted, a bigger fiscal impulse will result in higher inflation and macroeconomic imbalances that will call for adjustments in the medium term. this makes the monetary - fiscal policy interaction in the us economy particularly delicate. a scenario where the fed postpones the normalization process could create bubbles in asset prices, while if the fed responds categorically to neutralize the fiscal stimulus, it might trigger an excessive adjustment in asset prices and an increase in volatility. thus, the lack of coordination between fiscal and monetary policy in the united states is one of the main risks identified in this report. resolved, including a high level of domestic indebtedness. any pitfalls in this process

of exports than an uncertain state insurance through regular intervention or the fixing of the exchange rate. it is important to recall that the attempts to sustain the exchange rate led the country to a recession in 1999, whereas the float significantly reduced the impact of the crises that originated in argentina and brazil in 20012003, the financial crisis of 2008 - 2009 and the end of the commodity boom in 2014. in each of these last three episodes, the exchange rate float has provided enough room for monetary policy to reduce cyclical fluctuations. monetary policy and its perspectives are also built using as a working assumption a defined trajectory for fiscal policy. the working assumption in this report is that in 2018 the economy will receive a fiscal impulse in line with the budget announced by the authority. from then on, it is assumed that fiscal spending will follow the path of fiscal consolidation contained in the medium - term financial projection of the last public finance report. this working assumption is based on the information made public by the tax authority. possible adjustments to amounts and characteristics shall be incorporated as defined by the authority. this includes the formal definition of fiscal policy that the administration must make through a decree within the first 90 days of its mandate. finally, the public discussion on changes in fiscal figures reinforces the need to improve the institutional framework around the issue. any policy based on rules is effective only if it is predictable, which relies on the stability and clarity of its methodology, the commitment to comply with it and the transparency of its effective compliance. in any case, for the projections in this report to come true, especially in terms of growth, an attentive and constructive attitude from all sectors is required. the chilean economy may continue to grow in the short term because it has no major limitations on the macroeconomic side. the activity gap with respect to its potential is still significant, the current account deficit is moderate, financial conditions are favorable and inflation is low. if the plans of gradual normalization of monetary policy in the developed countries remain in place, the external conditions will continue to be good. finally, the central bank will maintain the monetary impulse until it sees clear signs of inflation converging to the target and will then withdraw it gradually. however, this recovery of growth will occur most certainly, if investment recovers accordingly. this is the component of demand that lags the most and, at the same time, contributes to increase potential growth, helping to avoid price pressures and thus generating a more gradual convergence of inflation. although the latest data shows