the past several months. as i just said, chile ’ s output, and especially domestic demand, has grown above expectations. some progress has been made abroad, but the risks derived from the eurozone crisis are still present. in this context, headline inflation has fluctuated substantially in recent months, due to one - time events associated with supply shocks. core inflation – discounting foodstuffs and energy – has declined slightly to near 2 percent y - o - y. the board, continuing with what has been the tone throughout the year, held the monetary policy interest rate at 5 percent. domestic situation as of november, y - o - y cpi inflation was 2. 1 percent, after rising to almost 3 percent in october ( figure 1 ). y - o - y growth in nominal wages has remained roughly constant in the 6 % to 7 % range, although with differences across sectors. output, meanwhile, grew 5. 7 percent y - o - y in the third quarter of 2012, flat from the previous quarter, but more than expected. the economic expectations survey ( ees ) of august – available at the closing of the previous monetary policy report – forecast 4. 6 percent growth for said quarter. the greater increase was due to better performance in general. however, output ’ s velocity of expansion dropped from 8. 3 to 5. 7 percent annualized. in the baseline scenario, the board estimates that gdp will grow 5. 5 percent this year. this projection is higher than the ceiling we estimated in september, with a similar revision as has been made in private forecasts. still, both our forecasts and private ones have experienced sustained upward revisions in the past year ( figure 2 ). on the domestic spending side, third quarter growth ( i. e. 8. 0 percent y - o - y ) largely surpassed second - quarter figures, however swollen by some specific factors. while every component of expenditure posted higher increases, the large increase in machinery and equipment investment is worth noting : 19. 9 percent y - o - y. the acceleration of domestic spending amplified the negative current account balance, which in the third quarter went to 2. 9 percent of the gdp accumulated in the last year. the baseline scenario assumes that the deficit will end the year 2012 at 3. 8 percent of gdp, exceeding september ’ s forecast of 3. 2 percent. meanwhile, the national financial system has operated normally in a context of strong investment and favorable external credit conditions. household credit has continued to grow

the future performance of the economy. another risk factor we have identified is the dynamic of the real estate sector. in mid year, we called the attention to the evolution of real estate prices, with a focus on some districts. today, seeing that some of those trends have deepened and widened, we need to return to this topic. as we have noted and is now part of public debate, during the last few quarters real estate prices have been steadily increasing in some districts and for some types of construction ( table 3 ). aggregate prices of office space also continued to grow, but less than did residential prices. in the residential sector, the sales of houses and apartments have risen substantially, especially in blueprint or catalog stage, indicating some shortage in the short - term supply ( figure 6 ). in the commercial sector, although the available vacancy indicators are still low, private real estate firms continue to forecast significant growth in the supply of office space for this purpose. although such price increase can find justification in its macro and microeconomic fundamentals, it must be monitored closely. these price increases have occurred in a context of high growth in housing demand and a significant expansion in output in the sector, accompanied with higher leverage among real estate firms. meanwhile, and because of the stage of the supply - demand cycle the residential real estate sector is in now, an acceleration of mortgage credit in the medium term cannot be ruled out. it must also be kept in mind that the lending standards for these credits have eased somewhat, which reflects in an increase in the fraction of the property price that is lent ( figure 7 ). this type of developments could create vulnerabilities in the real estate and construction industry, or in those households searching for a new home. it is also worth noting that the current combination of higher property prices, low long - term interest rates, favorable lending standards and higher volatility of other financial asset categories, configure a scenario that could motivate an increase in financial investment in the sector, potentially exacerbating these risks. therefore, we have stressed how important it is that agents consider these risk factors when evaluating their investment and lending decisions in the sector. in particular, these decisions need to bear in mind that past price increases are no guarantee of further increases in the future. we believe that raising this type of alert, thus increasing the amount of information available for risk assessment, is part of our role of promoting the normal functioning of the bis central bankers ’ speeches financial system