##n in the previous monetary policy report. this will also result in lower prices for copper and oil than were expected in march. in summary, the baseline scenario considers a reduced external impulse associated to slower world growth and somewhat tightened external financing conditions. it also considers that new stress episodes will occur in external financial markets ( table 2 ). as has been observed in recent months, these events can be triggered by negative news coming from the fiscal accounts, economic growth and the banking situation in the eurozone. the feeble external outlook contrasts with the performance of chile ’ s domestic demand and output in the last few quarters. in the first quarter of this year, gdp grew 5. 6 percent, exceeding forecasts in the march monetary policy report. in quarter - on - quarter terms, it expanded at trend rates, leading the board to estimate that output gaps are still narrow. this view is based on the fact that, although the labor market continues to show signs of being tight, these signs have not intensified : employment has reduced its rate of expansion, the unemployment rate has settled at low levels and y - o - y growth in wages, while still strong, has moderated lately. in the first quarter, domestic demand grew somewhat less than output, but private consumption and investment are still robust. inflation has behaved favorably in the past few months, below march ’ s forecasts. this, combined with oil prices falling in external markets, has reduced the risks that were envisioned then for its short - term trajectory. still, the services component of inflation continues to be the largest contributor to its increase, so medium - term risks remain present, due to the closing of output gaps and the tight labor market ( figure 2 ). market inflation expectations have moderated for the short term and remain around 3 percent over the projection horizon. the baseline scenario foresees gdp growing this year between 4 and 5 percent, which is the same range forecast in march. although the economy outgrew forecasts in the first quarter, the worsened external conditions will result in output slowing down more deeply than bis central bankers ’ speeches forecast in march. still, gdp growth will not drift substantially away from the trend, which the board estimates at 5 percent. this projection also considers that y - o - y growth in consumption will moderate further, in line with decelerating labor income and less expansionary lending conditions than some months ago. interest rates on consumer loans have risen lately, coinciding with a decline in the y - o -

within the region. overall, in the past few quarters part of the necessary adjustments have been taking place. germany has increased imports from peripheral europe, and has cut down its exports to the same countries. solving the imbalances of the eurozone will take time and it will not be easy. any solution will be costly, without a doubt. the events of recent weeks have confirmed that the crisis is far from over and that imbalances persist in the developed world that keep financial markets under stress. the reappearance of risks and the tensions we have seen are a reflection of that, and have deepened the differences between the behavior of the world economy and our own ( table 1 ). thus, today we are again facing significant risks. after some improvement in the first quarter of the year, conditions in the eurozone relapsed and their financial markets have experienced tensions in the levels of last december or worse. the baseline scenario of our march monetary policy report assumed that temporary, limited frictions would occur, although it warned about existing risks. in recent months those risks have resurfaced. there bis central bankers ’ speeches is new debate about a possible disorderly resolution of the eurozone crisis. several economies are questioning the political support to the fiscal austerity measures. economic and financial conditions in spain have worsened further and its risk premium is in record highs, despite the announced capitalization of its banking industry. in addition, there are still doubts whether other countries will be needing similar action. financial markets respond with increased risk premiums and greater appetite for safer assets. stock prices are falling across the board, volatility is up, the dollar has appreciated again and the interest rates of government bonds from economies perceived as safe have dropped to record lows. at the same time, commodity prices have fallen sharply, especially oil. as in late 2011, the main effects of these tensions in emerging economies, aside from lower commodity prices, have been the depreciation of their currencies, fallen stock prices and increased risk premiums on their external bonds. chile has not been spared, although as of the statistical closing of these reports the effects have been limited. compared with march, the peso / dollar parity has depreciated somewhat below 5 percent ; the stock market, as measured by the selected price index ipsa in pesos, has lost over 7 percent, and the sovereign premiums of chilean cds have risen nearly 40 basis points. money markets, meanwhile,