world will probably take some time, but sooner or later the differences between emerging and developed economies will narrow, mitigating pressures on our currency. beyond these fluctuations, the gains in competitiveness that our country needs in order to remain on the path to development will be achieved not with actions that artificially increase the level of the nominal exchange rate, but rather with structural reforms that will improve productivity and, therefore, the competitive stance of our exports. the many differences in the speed of the economic recovery in the world has combined with foreign exchange tensions and, in the past few months, increased inflationary pressures at the global level. food prices, responding to the stronger demand of emerging economies and to worsened supply - side conditions, have skyrocketed, rising even faster than between early 2007 and mid - 2008. add to this the sustained increase in the oil price since mid - 2010, which intensified last february because of the political unrest in the middle east and northern africa. bis central bankers ’ speeches under these circumstances, today monetary policy faces an important challenge. like after the global financial debacle of 2008, when it was highly flexible in responding to the confidence crisis around the world, now it must again be flexible in withdrawing the monetary stimulus, creating the conditions for sustainable growth and acting preventively to avoid a resurgence of inflation. since last december, the board has raised the monetary policy interest rate ( mpr ) by 75 basis points to 4 percent in the meeting of last march. in the scenario we consider the most likely, we will continue to remove the monetary stimulus, at a pace that will depend on unfolding macroeconomic conditions, but which will be principally oriented to achieving the inflation target. now let me describe the factors that underlie the most likely scenario and the main risks it faces. macroeconomic scenario in the last few months, y - o - y cpi inflation, in line with projections in december ’ s report, has hovered around the target, with an annual variation of 2. 7 percent at february. core indicators have returned to positive, yet still low ( figure 1 ). nonetheless, as i said, even if actual inflation continues to be aligned with the target and our previous forecasts, the latest developments have increased our concern for inflation, as they have in other economies. in the emerging world, growth has proceeded as expected, within an environment where foreign exchange tensions remain and commodity prices continue on the rise, especially for oil and foodstuffs ( figure 2 ). this

levels of capitalization would permit it to absorb an episode of sharp gdp slowdown, an increase in the cost of credit in pesos and an exchange rate depreciation. meanwhile, the state keeps a net creditor position, contributing to the access to external loans at low spreads. our terms of trade, although lower than some months ago, are high by historic standards, and our external credit access conditions are good, also by historic standards as well as compared with other emerging economies. annual inflation is somewhat above 4 %. the latest monthly cpi figure was unexpected, but given its characteristics it does not change our evaluation of the medium - term inflation trend, which remains centered on 3 %, just as we stated in our monetary policy report. private inflation expectations are also stable around 3 % y - o - y. this body of information leads us to establish that our baseline scenario remains in full force. but still in this conjuncture, which looks fairly favorable for the chilean economy and the chileans ’ financial situation, it is necessary to warn about the high risks that persist and that is why the cbc keeps risks for growth biased towards more negative scenarios. in particular, among these risks there is the possibility of new episodes of international financial volatility ultimately affecting the agents ’ expectations, global demand and international credit. the possibility is still there of a deeper than forecast recession in the eurozone, as well as of a disorderly evolution of the continent ’ s problems or even of a fragmentation. and one must also consider the possibility of a sharper adjustment of growth in china. neither should geopolitical tensions in the middle east be overlooked, with its potential implications on the oil price. all these external contingencies are part of the preoccupations we monitor closely at the cbc in cooperation with the finance ministry and superintendences of the financial sector, within the framework of our coordination meetings and those of the financial stability committee. the preoccupation motivating this session is which measures we could take to confront a further worsening of the global situation that could wash over our domestic economy. the central bank of chile has the necessary tools and policy space to act to mitigate the effects of adverse external scenarios over the chilean economy. the capacity of the bank to react to a global worsening has been already proven during the episode of 2008 – 2009. the board, as has been said time and again, has the flexibility and disposition to use these tools as needed. in