the fed has been communicating for some time already. financial market expectations, however, are split between one group foreseeing cuts in the policy rate and another that now foresees rises. the main source of uncertainty originates in the future course of growth and inflation. the second quarter should feature a strong increase in measured growth, but future growth is still a question mark. about the euro zone, the market anticipates that, in order to hold inflation around the target – annual inflation below but close to 2 % – the ecb will need to raise the policy rate a couple of times during the next 12 months by 25 basis points each. in the case of japan, markets also project two rises in the policy rate over the next 12 months. on the other hand, long term interest rates are on the rise in industrial economies, mainly reflecting increased real rates rather than an increase in inflation expectation or of duration premiums. the increases in long - term interest rates may be indicating better growth prospects in the u. s. now that a soft landing is more likely. however, overall global financial conditions are very accommodating, with risks premium that, although beginning to rise, are very close to their record lows. this, despite the flight to quality phenomenon observed in the past several weeks as a result of perceived risk increase because of the market status of low - quality mortgage loans in the u. s. in any case, the levels of market volatility in emerging economies are significantly smaller than they have been in earlier episodes. the dollar has depreciated against the currencies of industrial economies, responding to the evolution of the business cycle. in the past few days, this has been aggravated by concern about how the u. s. housing market situation will unfold. the chilean peso, similarly to currencies in the rest of emerging economies, has also appreciated against the u. s. dollar due to weakness of the latter. exporting or import - substituting sectors that are selling their produce at a dollar price not too different from the price they were getting towards the end of 2001, have possibly endured a large loss of profitability. this is directly associated with the multilateral depreciation of somewhat more than 40 % suffered by the dollar in the world since then. in connection with the expansionary cycle of the world economy, and also with the depreciated dollar, prices of copper, oil and derivatives – especially gasoline – are picking up

calani. page 1 of 5 central bank of chile march 2019 to 0 % in the fourth quarter, and to minus 14 % in 1982. that same year, unemployment reached a record of 25 %, and businesses all over the country were seriously hampered, ultimately affecting their payment compliance. banking profitability went quickly to negative territory and the delinquency rate quadrupled to 15 % of the total portfolio, putting several banks solvency and operations at risk. several factors contributed to the deterioration of the macroeconomic environment in 1982. external interest rates rose, the availability of external credit decreased, and terms of trade worsened in the wake of the escalation of oil prices. this put enormous pressure on the chilean peso — which had been under a fixed exchange rate scheme since 1979 —. this regime broke down dramatically and spread to almost all business sectors, given large fx exposures, and heavily leveraged financial conglomerates. all these factors interacted with one another to become an outright banking crisis. but, whatever the causes of the crisis, unsustainable debt was mostly explained by internal vulnerabilities : inappropriate regulation, weak supervision, and lack of attention to excessive credit growth, leveraged on a fixed exchange rate scheme. although the first aid took the form of “ emergency loans ” by the central bank to commercial banks, during the following year conditions deteriorated rapidly enough to lead to the intervention of 11 banking institutions. another 8 were added in 1983, including the two largest banks in the system. in all, the intervened institutions represented 60 % of total credit. all directors and executives of these institutions were, removed from their posts, and replaced by provisional administrators. measures to fight the crisis aimed at the liquidation of non - viable banking entities, improvement of balance sheets of viable entities through the purchase of deteriorated portfolios, and the reduction of financial burden of bank borrowers through debt reprogramming and preferential exchange rates. in 1985, this extended to the recapitalization of the intervened banks, through the so - called “ popular capitalism ” program. perhaps the most important program was the purchase of deteriorated portfolios by the central bank under a variety of schemes, including repurchase agreements, and in exchange of debt instruments, liquid resources, and a new liability called “ subordinated obligation ”. the impact of these programs on the assets side of the central bank balance sheet was huge, and so were the costs of the complete rescue plan. altogether, it is estimated that