be ruled out, hindering growth in other economies due to its weight in the global economy, and affecting commodity prices significantly. domestically, as aforesaid, medium - term risks for inflation are still present. the growth rate of domestic demand and output has dropped, albeit not as fast as expected. although the board estimates that output gaps have not narrowed further, if output again takes up a more dynamic path, there can be pressures pushing inflation up and demanding a monetary policy response. domestic demand has outgrown gdp in the last two years, thus widening the current account deficit. households ’ saving is low compared with earlier years, while corporate savings have decreased in the past year and investment is in record - high levels. if domestic demand becomes more dynamic, it could amplify the current account deficit. this could be risky in a scenario of weak world growth. as noted in our financial stability report, aggregate solvency and liquidity of the chilean economy remains stable. this is important, considering that banks ’ and enterprises ’ access to external credit could be hampered by a further deterioration of the global financial environment. in any case, and despite the impact of external volatility on the prices of some assets, financial markets have operated normally. in this context, i would like to highlight the need to continue advancing in initiatives to strengthen our regulatory and supervisory framework. one such case is the bill to reform insurance companies currently being debated in congress. the banks ’ solvency and liquidity indexes have been stable in the first half. in a context of good rents, core capital has hovered around 10 percent while regulatory capital – as measured through risk - weighted assets – around 14 percent. meanwhile, since the last financial stability report the banking industry has increased its long - term debt certificates, and some medium - sized banks have pursued strategies to attract retail deposits. another favorable development is the greater diversification of banks into different types of credit from abroad. also worth noting is the hoarding of liquid assets in foreign currency. the stress tests presented in our financial stability report show that the banking industry ’ s current capitalization levels allow it to cushion an episode characterized by a gdp slowdown, higher financing costs in local currency and an exchange rate depreciation associated with the materialization of the external risk scenario. as for household debt, it should be noted that, on aggregate, borrowing has increased in tandem with disposable income. this has translated into fairly stable aggregate debt indicators, whether comparing the debt level

to much more modest falls in construction output. and growth in the sector is estimated by the ons to have resumed in february. also, construction was very weak in the first quarter of 2011, only to bounce back on the ons measure in q2. mismeasurement, in what is still a fairly new monthly statistical series, can ’ t be ruled out. those straws in the wind suggest that the drag on growth may prove to be temporary, so long as the global environment does not deteriorate. second, the additional bank holiday for the queen ’ s diamond jubilee in june will reduce the number of days worked. taken together, all this means that you will probably see weak headline ons numbers for growth in the first two quarters. the mpc will be focused mainly not on headline growth but rather on indicators of underlying activity. surveys of uk companies ’ output have, in fact, continued to tick up, with the most recent cips readings, taken as a whole, at the highest level for over a year. survey measures of private sector employment have begun to edge up too. overall, surveys point to growth in underlying activity over the first half of 2012 – not stellar growth, indeed modest growth, but growth nonetheless. but if the overall story of recovery in underlying growth still looks broadly intact, there has been bad news on the inflation front. the recent inflation data, particularly for goods prices, has come in a little stronger than expected. sterling oil prices and wholesale gas prices have risen by more than 5 % since february. together with duty changes announced in the march budget, that seems likely to leave the short - term outlook for inflation on a path a little higher than incorporated into the central projection described in the mpc ’ s february inflation report. i think inflation might remain above 3 % throughout the second quarter of this year, and possibly into the second half of the year. already in february, there was a risk that inflation might fall back towards target less quickly than incorporated into our “ most likely ” central outlook. not only was there a prospect of supply disruptions to oil production, there was also a possibility that firms might seek to rebuild margins faster than assumed as and when economic recovery becomes more secure. so one possibility is that companies have begun to rebuild or protect their profit margins more quickly than expected. according to the latest ons data, by the end of last year the profits of mainstream businesses ( excluding oil and finance ) had fallen to their lowest share