even if we had had perfect foresight at the time, the mpc would have still been faced with the same choice – the adjustment in real wages was unavoidable. of course if nominal wages start to rise in an attempt to offset that inevitable fall in standards of living, risking a wage - price spiral as the uk had in the seventies, then the mpc would be duty - bound to raise bank rate sooner to bring inflation back to target, regardless of any short - run pressures on output. given the nature and timing of the shocks, i would argue that the best we can do with monetary policy is accept the initial impact and then to gently steer inflation back to target in the medium term. in the remainder of this speech, i want to consider how we come to make our judgments about that, month - by - month, and in particular, discuss the relative role of economic forecasts and human judgment. monetary policy in practice the bank has come in for a lot of criticism recently about its forecasting record. for a period now, cpi inflation has been significantly higher than the bank had been previously expecting. and in 2010 q4 and 2011 q1, output growth disappointed relative to our central expectations. in this section, i want to dig a little deeper into the issues around models and forecasts. step back for a second and consider what an economic model actually is and why it might be useful. at its heart, a model – any model – is just a framework for thinking about an issue, be it how the economy reacts to different shocks, how the setup of a car might affect the way it handles a corner, or how a disease might spread through a population. as all modellers would concede, they can only provide an approximation of reality, which is always far more complex. that isn ’ t to say that models aren ’ t useful – far from it. economic models, like any other, are essential. but they are not a panacea. for example, it would be a mistake to think one can just keep learning and adding to a single economic model until it gets ever more complete. what tends to happen is that one just ends up with a very large model which nobody can understand or use for any practical purpose. instead, the best way forward in understanding the economy seems to be to use a variety of different models, remembering the relative strengths and weaknesses of each, and applying judgment accordingly. that is exactly what the mpc does when it considers

mpr forward mpr jun. 22 mp meeting 12. 0 11. 0 10. 0 9. 0 8. 0 7. 0 6. 0 5. 0 4. 0 3. 0 2. 0 1. 0 0. 0 ( * ) the corridor is constructed following the methodology in boxes v. 1 of march 2020 mp report and v. 3 of march 2022 mp report. it includes the may economic expectations survey ( ees ) and the june financial traders survey ( fts ) previous to the mp meeting, plus the average smoothed forward curve for the quarter ended on 1 june. this is calculated by extracting the implicit mpr considering the forward curve over the overnight swap curve of up to 2 years, discounting the fixed rates of each maturity to the simple accrual of the overnight index swap ( ois ). for the current quarter, the surveys and the forward curve consider the average of daily effective data and are completed with the respective sources source : central bank of chile. table 1 international baseline scenario assumptions 2022 ( f ) mar. 22 jun. 22 report report 2023 ( f ) mar. 22 jun. 22 report report 2024 ( f ) mar. 22 jun. 22 report report ( annual change, percent ) terms of trade trading partners'gdp world gdp at ppp developed economies gdp at ppp emerging economies gdp at ppp 11. 8 6. 3 6. 1 5. 1 7. 0 - 3. 1 3. 3 3. 1 2. 9 3. 2 - 4. 0 2. 7 2. 6 2. 4 2. 6 lme copper price ( us $ cent / lb ) average wti - brent oil price ( us $ / barrel ) ( f ) forecast. source : central bank of chile. - 3. 1 3. 3 3. 4 2. 0 4. 3 ( level ) - 4. 1 2. 9 2. 7 1. 5 3. 5 - 1. 5 3. 1 3. 3 1. 8 4. 3 - 0. 2 3. 1 3. 2 1. 7 4. 2 table 2 domestic scenario gdp demanda interna domestic demand ( w / o inventory change ) gross fixed capital formation ( gfcf ) total consumption private consumption goods and services exports goods and services imports current account ( % of gdp ) gross national savings ( % of gdp ) nominal gfcf ( % of gdp ) 11. 7 21. 6 18. 0 17