jose de gregorio : the world economy, foreign exchange tensions, and recent monetary policy making in chile keynote address by mr jose de gregorio, governor of the central bank of chile, at the monetary club of universidad finis terrae, santiago, 20 may 2011. * * * abstract this presentation discusses risks and tensions that have emerged in the global economy due to the ongoing process of world economic recovery and its implications on the chilean economy. it reviews the decoupling of emerging economies from developed ones in terms of growth, the difficulties endured by developed economies to boost their feeble recovery, europe ’ s public debt issues, the high commodity prices and symptoms of overheating in some emerging markets. this scenario has pushed emerging economies ’ exchange rates to their lowest levels of the past decade. it stands out that, although an important step to change the composition of world demand, it has created tensions and in some cases has prompted the adoption of policies to mitigate exchange rate adjustments. capital inflows have added pressure to the exchange rate discussion in some emerging economies and might favor an unhealthy increase in lending and incubate financial fragilities. chile ’ s last forex intervention is mentioned. the differences in capital flows between chile and other countries and episodes of substantial flows into emerging economies are described, emphasizing that large capital outflows from chile have created a negative net balance. it is also suggested that the current level of the neutral mpr is probably lower than previous estimates, influenced by the low international interest rates. thank you for inviting me to present at the monetary club of universidad finis terrae. this is a good opportunity to review some recent developments in the chilean economy, in particular the behavior of the exchange rate, the forex intervention under way, and our monetary policy decisions. but before diving into these issues, let me take a look at some important elements shaping the international scenario, which is where the main risks and tensions facing our economy originated. the international economy the global economy is leaving the great recession behind. its recovery, however, has been heterogeneous and is subject to risks. the developed world still hasn ’ t fully overcome the negative effects of the crisis, while emerging markets are currently in a strong growth path. despite they did not commit the excesses of their advanced counterparts ; they suffered the effects of the crisis. overall, the magnitude of the impact on growth in emerging economies was milder than it could have been expected based on recent history,

financial requirements are becoming increasingly more sophisticated. this has resulted in a major reorientation of the banking industry to become consumer driven and to become more focussed on consumer needs. this has brought new financial products and services for consumers. the rise of consumerism demands that products and services can no longer be just generic but must now be tailored to meet consumers'evolving needs. with the rise of consumerism, the need to create informed consumers is even more important. as the financial sector continues to rapidly evolve, offering sophisticated products and services to cater for greater and more diverse needs, consumers need to become even more financially savvy. while the consumer has an important responsibility to become more informed, financial service providers, the regulators and the authorities have an important role to provide the enabling and conducive environment that nurtures consumer empowerment. indeed, consumer empowerment begins with financial awareness and consumer education. this in part can be achieved through greater disclosure and by increasing the education outreach to consumers thereby enhancing their ability to make informed financial decisions. ladies and gentlemen, this exhibition aims to provide an enabling platform for consumer empowerment. myfex2007 is a conscious effort to raise financial awareness by bringing together the various entities in the financial system that includes the industry, regulators and other agencies that provide information, the avenues for redress and financial advice with the aim of creating financially informed consumers. in essence, this one stop centre creates a comprehensive opportunity for consumers to improve their financial literacy and for the financial players to engage the consumers. an important thrust of our policies at the central bank is financial inclusion. this is to ensure that every economic activity, geographical region and segments of society have access to financial services thereby promoting a more balanced growth. financial inclusion is supported through a number of strategies amongst which includes increased access to financial services, access to financial information and advisory services and consumer education. currently, 98 % of the adult population in malaysia have a savings account. given this greater financial inclusion, banks need to recognise their role and their special relationship with their customers. customers expect banks to provide relevant financial information to them to ensure that they will be able make informed judgments. avenues for the public to seek redress is also an important part of the financial safety net. the financial mediation bureau provides an alternative redress mechanism between the service providers and consumers on financial disputes. in addition, with the objective of promoting prudent financial management, the credit counselling and debt management agency offers free advisory services. this is to ensure the