currently the first quarter of 2012. annual cpix1 will show a more gradual convergence to 3 % ( table 2 ). all this within a substantially more uncertain setting than before. this scenario rests on other working assumptions. first, it is assumed that in the long term the real exchange rate ( rer ) will be similar to its current level. this assumption is made considering that, with the nominal exchange rate and parities prevailing at the statistical closure of this report, the rer is consistent with its long - term fundamentals. another working assumption is that inflationary pressures from the labour market will generally not experience any significant change with respect to current indicators. finally, the external scenario will continue to add momentum to the economy and imported inflationary pressures will remain contained. world growth projections for the period 2010 – 2011 have been revised upward and commodity prices will remain near current levels ( table 3 ). the above projections include the assumption that monetary policy will remain very expansive in the following quarters. towards the end of the projection horizon, the monetary policy rate will converge to a level similar to the one indicated by march ’ s economic expectations survey. however, its pace of normalization will be somewhat faster than what was considered in that survey. it is important to consider that, until the last week of february, market expectations for the mpr indicated that its upward phase would begin in the second quarter and that the rate would stand between 2. 5 and 3. 0 percent by the end of the year. after the earthquake and tsunami, the expectations of analysts and survey respondents about the level of the mpr and its velocity of increase fell. in particular, the expected level for the mpr for the end of 2010 stands in the 2. 0 – 2. 5 percent range ( figure 8 ). as usual, the scenario outlined here is subject to several risks. compared with december forecasts, the recovery process and development prospects for the chilean economy have not been hindered by the earthquake and tsunami ; however, in the short run, the risk scenarios are dominated by the catastrophe. particularly relevant is the medium term effect of the aggregate demand impulse originating in the reconstruction works that will be carried out. the magnitude, composition, speed, form of financing and focus of these reconstruction expenditures can have substantial effects on the baseline scenario in terms of output, inflation and the performance of financial markets. there are also risks associated with the time that it will take for productive activities to return to normal and for agents to materialize

g. the last ten or fifteen years ) the conclusions are the same. in this context, some economies have implemented foreign exchange measures, including interventions to mitigate the appreciation of their currencies. while these actions may be desirable in certain situations – chile has actually used them in the past and they are part of its policy toolkit – implementing them requires a careful evaluation of both the benefits and costs to the country. these measures are appropriate to correct an over - reaction in the value of the currency against its medium - and long - term fundamentals or as a way to build an international reserve position, providing greater safety in the event of a sharp contraction of external financing. these benefits are difficult to quantify objectively, but it is reasonable to think that the lower the availability of reserves or the further away the real exchange rate is from its long - term trend, the greater the benefits. at the same time, we must always bear the costs associated with these interventions in mind. first, there is the direct financial cost, because the reserves are invested in highly liquid and safe instruments, but whose interest rates are lower than that of the local instruments financing their acquisition. this generates a significant cost that eats into the bis central bankers ’ speeches central bank ’ s net worth. moreover, it is important to preserve the flexibility of the exchange rate in the chilean economy because it facilitates accommodating external shocks. the major external crises we have faced in the past have been associated with overly rigid exchange rate regimes, which exacerbate credit cycles and mismatches, delay relative - price adjustments and when they finally occur, they have high financial and real costs for the economy. as usual, our baseline scenario reflects those events that are believed to be the most likely with the information at hand at the closing of this report. there are risk scenarios, however, which if materialized, may reshape the macroeconomic environment – in some cases, significantly – and therefore, may alter the course of monetary policy. on this opportunity, having evaluated the alternative scenarios, the board estimates that the risk balance is biased upward for output and unbiased for inflation. internationally, the probability of negative scenarios in the united states have moderated in recent months and in china the threat of a sharp correction in growth has eased. however, the possibility of tensions intensifying in the eurozone has not receded. the fiscal and financial fragility in this region persists and the ability of policy makers to implement