light of the background, analysis and communication that the bank had been delivering in the preceding months. moreover, it is a decision based in depth on the report that i have presented today. before i finish, i would like to draw your attention to the exceptional nature of the circumstances that led to this decision and its implications for the bank ’ s communication and actions in the future. at the beginning of this presentation, i mentioned that we have defined this decision as a “ recalibration ” of monetary policy, as it is an adjustment of the mpr to generate a monetary impulse compatible with the inflation target in the face of significant and consistent changes in the estimates of capacity gaps, inflation and the policy rate. this time around there has been an unusual combination of new information for all the structural parameters plus the new inflation measurement, pointing in the same direction. indeed, it is unusual for any economy to experience a change in the production factors of the magnitude and speed that immigration has triggered in chile in the last three years. it is also unusual for an increase in potential growth to be accompanied by a reduction in the neutral mpr, which in this case has occurred due to the magnitude and persistence of the fall in interest rates in the world. in previous episodes of cpi basket changes, we had not seen so important corrections to the inflation measurement as this latest one. faced with this unusual configuration of circumstances, the central bank of chile needed to be rigorous in its analysis, clear in its conclusions and quick in its response. it was helped by the research work and the updating of his models that have been progressing for some time. but once all the pieces of this puzzle have been assembled, the board has preferred acting over postponing a decision. it is an unusual action in the face of unusual circumstances. central banks today are not prone to surprising the markets and ours is no exception. we do not seek surprises for the sake of them, and certainly we have not concealed anything in our communications of recent months regarding the analysis that we have conducted, nor have we distracted attention away from it. however, after accumulating evidence and reaching a downright conclusion about its implications for monetary policy, we saw few advantages and many more costs in postponing. although our decision considered the option of waiting, signaling the possibility of this change before doing it, we believe that in the current situation taking immediate action had greater value. not because the economy was deteriorating dramatically, but because we were convinced of the consistency

the gdp range and the inflation projection for 2018, is not very different when viewed from a longer perspective, that is, considering the period 2018 / 2020. for all the above we believe that our economy still needs a positive monetary impulse over the next two years. certainly this impulse will be withdrawn as the gaps close and inflation converges to 3 %, but when will this withdrawal begin will depend on the evolution of our macroeconomy, which we do not see happening before the end of this year. it is important to bear in mind that although we see a balance of risks biased upwards on domestic activity, on the negative side the main risks come from abroad. the smaller slack for monetary policy making in the united states, the renewed divergence with other developed economies and its pressure on currencies ; the political tensions in the eurozone ; the oil price increase and associated geopolitical risks configure a complex scenario for the emerging world. this is especially true for economies that are seen as more vulnerable, either because their macroeconomic fundamentals are weak and / or because they do not possess the institutional characteristics that allow them to deal with external shocks and implement counter - cyclical policies. the link between institutional characteristics and macroeconomic fundamentals with the financial results when facing a stressful episode has been widely documented. a box in our report makes a brief review of the factors that intervene in this relationship, showing that the transmission of global financial shocks to emerging economies is more intense when they have a fixed exchange rate regime. it has also been shown that, in the face of episodes of financial stress, the volatility of interest rates is higher in economies where the currency does not float freely. in fact, one characteristic of the developments of recent weeks has been that the increase in long - term interest rates in several emerging economies has occurred along with the depreciation of their currencies. about the fragility of the macroeconomic fundamentals, we can see that countries with high levels of inflation ; high interest rates and bulging current account deficits are more likely to suffer significant adjustments in the prices of their assets when external conditions tighten. on this issue, a recent study published by the bank presents empirical evidence that a rise in the interest rate of the federal reserve affects more those countries that have a worse solvency situation — measured by their level of indebtedness — and liquidity, measured through their external asset position. how vulnerable does chile look based on these criteria? within