bilateral meetings remarks on the chilean economy since september monetary policy report rosanna costa, governor of the central bank of chile 2022 imf / wb annual meetings thursday 13 to saturday 15, october 2022 recent inflation developments currently, inflation is a major concern for most economies and chile is no exception. in chile, although with a slight moderation in the last figure — september 2022 —, total inflation reached 13. 7 % yoy, while core inflation — measured by the cpi excluding volatiles — continued to rise to 11. 1 % yoy. the sum of the august and september data — both figures known after the release of the last monetary policy report ( ipom ) — reveals somewhat higher inflation than expected with the surprise coming from food prices, both volatile and non - volatile. • inflationary factors behind the evolution of inflation there are some common elements to the rest of the world and some others more idiosyncratic. among the former, there is the increase in external costs since the end of 2021, explained by the increase in the price of raw materials and food due to russia's invasion of ukraine, and the disruption of supply chains. among the internal factors, one of the main elements identified is the domestic spending imbalances accumulated during 2021 — as a result of fiscal aid and pension fund withdrawals, that reached almost 33 % of gdp —, and which is especially evident in the still high level of private consumption. added to this is the increase in wage costs associated with the tight of labor market. however, this has diminished during 2022 with the recovery of labor supply and lower demand. the peso's depreciation has also played a relevant role in the rise in inflation. the increase in the exchange rate has been caused by a combination of internal and external factors, where the former have a greater weight. in recent years, the chilean currency has lost value vis - a - vis other comparable currencies, mainly because of greater local uncertainty and some political - legislative decisions taken in previous quarters. more recently, the peso's evolution has been more linked to the dollar's global appreciation. data for the quarter ending in august shows that job creation is stagnant, the unemployment rate remains at 7. 9 % and labor participation has stabilized. on the other hand, the internet job postings index shows a decreasing trend during the year. nominal salaries present annual increases of around 11 %, and real salaries remain at negative values close to 3 %

##less have reflected the paring of so called " fat " in corporate operations - - fat that accumulated during the long expansion of the 1990s when management attention was focused primarily on the perceived profitability of expansion and less on the increments to profitability that derive from cost savings. managers, now refocused, are pressing hard to identify and eliminate those redundant or non - essential activities that accumulated in the boom years. now, with margins under pressure, businesses effectively have been reorganizing work processes and re - allocating resources so as to use them more productively. moreover, for capital with active secondary markets, such as computers and networking equipment, productivity may also have been boosted by a reallocation to firms that could use the equipment more efficiently. for example, healthy firms reportedly have been buying equipment from failed dot - coms. businesses also may have managed to eke out increases in output per hour by employing their existing workforce more intensively. unlike cutting fat, which permanently elevates the levels of productivity, these gains in output per hour are often temporary, as more demanding workloads eventually begin to tax workers and impede efficiency. there are those who point out, quite correctly, that a significant part of the output of the late 1990s was wasted in a misallocation of capital to pie - in - the - sky ventures. but that output was misused does not subtract from the evident capacity to produce that output, and it is this that our measures of structural productivity attempt to capture. perhaps the return to a low - inflation environment in recent years in itself explains the intensification of competitive pressures, which has been a spur to the growth of productivity. indeed, the data do suggest a relationship between inflation and productivity growth over the long run. but that statistical relationship is modest at best and inferring causality is complicated by a circularity that arises because increased growth in output per hour depresses unit labor costs and, hence, prices. taken at face value, historical relationships suggest low inflation would explain very little of the most recent surge in output per hour. to be sure, while lack of pricing power and associated competitive pressures may have initiated much of the cost cutting and organizational changes that have occurred, it will ultimately be the quantity of fat in the system and the opportunities for productive reorganization that will determine the potential gains in productivity. only in retrospect, if then, will we be able to ascertain how much of the past