inflation to 3 % has not yet been consolidated and as long as it remains above that figure, the task of the central bank will not be complete. the causes of inflation have been discussed at length. the main one was the excessive increase in spending that led to the liquidation of social security savings and across - the - board fiscal transfers. in addition, there was the pandemic and its consequences on the local economy and in global production chains, plus the effects of the war in ukraine. the truth is that after several quarters have passed since these shocks occurred and the central bank has made a very significant adjustment in monetary policy, high inflation continues. moreover, core inflation, the part that best reflects local trends and pressures, has stabilized at high levels and, i must say, bringing important surprises into our projections. the natural question that arises is why is this happening? and why is inflation taking so long to come down? 58. on the one hand, it is very clear that the string of shocks we faced was very unusual. they were very big in magnitude and had a concatenation that exacerbated their effects. on the other hand, there were the accumulated cost pressures on companies, the volatility of different macroeconomic variables, such as the exchange rate, and a scenario where uncertainty was high for a long period of time. to these elements must be added indexation and other second - round factors that add persistence to the inflationary effects of the mentioned shocks, as has been highlighted in previous reports. this confirms that a very important element behind this stubborn inflation is that the economy has failed to reverse the impact of the spending excesses that accumulated in earlier years. as i said a while ago, the data for the end of 2022 and the beginning of 2023 show that private consumption is receding, but at a slower pace than expected. this has important effects on inflation dynamics and, as long as we do not succeed in completing the adjustment of the economy, inflation will not come down. does this mean that the central bank is not worried about low growth or rising unemployment and is only concerned about inflation? quite the contrary. monetary policy is always aimed at achieving low and stable inflation, which is achieved by smoothing the business cycle so that the economy can sustain growth without generating price pressures in either direction. the problem we must solve is that, for several quarters, our economy grew beyond its possibilities. this led to enormous imbalances, which caused high inflation. therefore,

costs and the temporary increase in imports of services stood out ( figure 7 ). on the external front, until the beginning of march, there was an environment of higher growth and concern about inflation. on the one hand, the increase in global growth expected for this year was based on upward surprises in the performance of several important economies, such as the united states, china and the eurozone. on the other hand, in developed world economies, core inflation indicators were high, despite the fall in total inflation. all this heightened the concerns about inflation and the need to raise interest rates by the main central banks. in this scenario, commodity prices rose and risk aversion fell. in general, interest rates rose as a result of the higher inflation outlook ( figure 8 ). the tone of the external scenario changed significantly in the last month, as doubts arose regarding the financial health of international banks. the problems of several banks in the united states and europe opened a scenario of greater global uncertainty. this has generated volatility in financial markets, which reduced risk appetite and led to an appreciation of the dollar and a decrease in government bond yields, anticipating a slower pace of rate hikes by the main central banks. it is worth noting that the market anticipates a lower fed funds rate path than the federal reserve itself has communicated. these weeks have also seen declines in stock markets and reductions in the prices of some commodities ( figure 9 ). the degree of uncertainty regarding the evolution of the global financial situation is significant. the authorities of the countries involved quickly adopted decisions to contain the impact of these episodes. of particular note are the coordinated actions taken by central banks to safeguard the provision of liquidity in the markets. private banks have also made efforts, particularly in the united states. however, there is still anxiety among market agents and volatility remains high. the chilean banking system is subject to robust regulation and supervision, which prevent situations such as those that triggered the current episode of uncertainty in international banks. the dominant banking business model in chile is a traditional one. it is focused on granting credit on a more diversified basis of financing and adequate management of maturity mismatches. the regulatory framework has been updated and considers basel iii capital and liquidity standards for all banks. all of them are subject to continuous risk management, capital adequacy, liquidity and transparency supervision processes. in addition, both the central bank and the commission for the financial market, cmf, permanently monitor the banks'capacity