borrowing faced by households and firms, affirming that such transmission could be reasonably expected to continue. this diagnosis still holds, particularly after what we have seen since our last meeting and especially in consumer and commercial loans ( figure 4 ). we estimate that, without the 425 basis point ’ s reduction of the mpr that began in march, consumer lending rates would be between 400 and 500 basis points above their current levels. short - term commercial credit rates, at 30 to 89 days, would be between 350 and 450 basis points above their current figures. long - term mortgage loans would be some 25 to 30 basis points higher. we believe that the reduced funding costs of financial institutions will continue to be passed on to the cost of credit with the usual lags. we expect the banking industry to actively cooperate in this process. a full normalization of credit demand and supply conditions will have to wait until the dust settles in the international financial scenario, to allow more clarity about global and domestic growth prospects. these risk factors have a direct incidence on credit risk premiums implicit in banking operations. we can see that the monetary policy action has more than offset the increase in risk premiums, resulting in a significant drop in credit costs, thus mitigating the effects that the global crisis has had on our economy. one important aspect of the access to credit, aside from its cost, draws from the effect of the environment of uncertainty and economic weakness on the credit approval conditions and credit demand. in these dimensions, we have recently seen signs of stabilization. internationally, the various indicators of uncertainty and risk in global financial markets, while remain relatively high, have continued to fall. domestically, the evidence at hand from the banking credit survey for the second quarter of this year reveals that, on average, banking institutions have already stopped tightening their lending standards and perceive early signs of a recovery of the demand for credit. this is particularly evident in the mortgage segment, suggesting that the levels of the long - term interest rates on these loans are not necessarily holding back the demand for housing credit ( figure 5 ). also, early in the year we witnessed a substantial increase in issues of corporate bonds, which can be interpreted as the response to less favorable financing conditions in both the domestic and the external banking market, a situation that has lost momentum in recent months. conclusions monetary policy has acted aggressively to soften the impact of the global financial crisis. although it is impossible to fully offset all the repercussions that such a severe crisis has

debt has spurred doubts about the sustainability of their fiscal accounts and monetary arrangements, questioning their capacity to grow in the coming years. although luckily, and thanks to the efforts made, the chilean economy is not in such a situation, the determination of the long - term interest rates does depend indisputably not only on the prospects for growth and inflation – and thus on monetary policy – but also on portfolio decisions of domestic agents and the appetite for risk. developments early this year are very illustrative. at times where there was still high uncertainty, and there was a higher demand for safety and liquidity, the long - term interest rates of various public instruments in chile went to record lows. as this uncertainty faded, the precautionary demand followed suit, pushing up long - term interest rates in pesos and in uf until the end of may. in the last couple of months, because of a string of episodes of higher and lower doubts about the true strength of the global recovery, long - term interest rates have fluctuated, but always above the levels of early this year. a similar pattern has been seen in long - term interest rates around the world ( figure 2 ). we are not indifferent to the evolution of long - term interest rates. this is evident from the facts that, to enhance our last monetary policy measure, we have not only begun providing liquidity at the current mpr level for up to six months, but we have also suspended issues of instruments at one to two years ’ terms. furthermore, we permanently take into consideration bond issuance plans of the treasury before defining our own programs. nonetheless, it is necessary to undertake a careful analysis of the long - term interest rate levels to properly assess their implications. after all, very low long - term rates are a symptom of depressed prospects for long - term growth and strong demand for safety. at the end of the day, what matters is the cost of borrowing for households and firms, which does not stem directly from risk - free interest rate structures, but goes through the filters of the capital market and the banking system. pass - through from monetary policy to market interest rates as i indicated the latest monetary policy measures were clearly transmitted to the banking system ’ s borrowing rates, thanks to the complementary measures adopted by the board at its last meeting ( figure 3 ). last march, we stated that the aggressive reductions to the mpr implemented by the board in january and february had begun passing through to the cost of