path of purchases. 4 under the most recent articulation of that framework, in considering when to reduce purchases, the committee will “ assess whether incoming information continues to support [ its ] expectation of ongoing improvement in labor market conditions and inflation moving back the committee also noted : " in determining the size, pace, and composition of its asset purchases, the committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. " see board of governors of the federal reserve system ( 2012 ), " federal reserve issues fomc statement, " press release, september 13. see board of governors of the federal reserve system ( 2013 ), “ federal reserve issues fomc statement, ” press release, march 20 the chairman delivered a statement before the joint economic committee, u. s. congress, on may 22, 2013. information on the chairman ’ s june 19. 2013, press conference is available on the board ’ s website at www. federalreserve. gov / monetarypolicy / fomcpresconf20130619. htm. bis central bankers ’ speeches toward its longer - run objective. ” 5 the path of purchases is entirely data dependent, as numerous fomc participants have emphasized in public remarks. the market reaction to the chairman ’ s may testimony and the june fomc press conference was significant, particularly given the modest character of the news : that the committee might bring purchases to a gradual halt over the course of a full year, but only if the economy performs broadly in line with the committee ’ s expectations – which is to say, pretty well. many factors may have contributed to this market reaction. among them, i would argue that market expectations began to lose touch with committee intentions in two ways. first, while the committee sees policy as data dependent, markets seem to fix on dates. the decision to reduce purchases now or to hold off for a meeting or two does not carry great macroeconomic significance. but, to a fixed - income trader, the timing of the decision is everything. it appears that many market participants concluded after the june press conference that the committee was eager to reduce purchases and committed to doing so at the september meeting, independent of incoming data. second, the expected path of the federal funds rate, as reflected in various market prices, increased significantly, implying an earlier liftoff from the zero lower bound than suggested by the committee ’ s forward guidance. 6 many fomc members had said

. later, with the evidence of alleviated inflationary pressures and a sharp contraction in demand, the central bank decided to cut the mpr by 250 basis points at both its meetings of february and march. the monetary easing process continued and completed 775 basis points in seven monthly meetings, bringing the mpr to 0. 50 % in july 2009, the minimum level deemed adequate for a normal functioning of money markets ( figure 6 ). in addition, the central bank also announced that the mpr would be held constant at this minimum level for a prolonged period of time. in order to strengthen the commitment to this announcement, which goes beyond the regular monthly mpr setting, the bank adopted some non - conventional monetary policy measures, extending the overnight liquidity facility for banks at the mpr to 180 - day term through a term liquidity facility ( facilidad de liquidez a plazo, flap ). the extraordinary liquidity measures provided during the crisis extinguished in mid 2010 and their withdrawal did not generate stress in the money market. the shift to a countercyclical policy stance was also taken forcefully on fiscal policy. in january 2009, the government announced a sizable fiscal stimulus package, amounting to us $ 4 billion for that year, equivalent to 3 % of gdp. the recovery process the economic recovery was faster than expected. in the second half of 2009, activity grew at an annualized rate of around 6 %. key factors in this trend included the increase in private consumption and the recovery of investment. initially, the recovery of private demand was due mostly to the rebuilding of inventories, it continued with the dynamism of consumption and gross fixed capital formation. this contrasts with the situation in advanced economies where after inventories recovered, private demand has been sluggish due to the very weak financial position of households. several indicators available until end february of 2010 were pointing to a consolidation of the consumption and activity trend. but then, on february 27th, the fifth strongest earthquake ever measured hit our country. the huge initial contraction of aggregate output was largely concentrated in manufacturing. the immediate disruptions of the productive processes due to 27 - f dissipated quickly and by the second quarter of the year output exceeded the levels prior to the earthquake. the economy remained on a growth trend and inflation has been below expectations, owing to lower imported inflation and some specific factors. the baseline scenario of our december monetary policy report assumes that the chilean economy grew 5. 2 % in 2010 and that gdp growth will