. long - term interest rates have responded well to monetary policy decisions, forward guidance and non - conventional tools. after the june monetary policy meeting and the release of our monetary policy report, 10 - year bond rates dropped some 40 bp. g. central bank measures extend well beyond the immediate emergency and are likely to foster economic recovery once containment measures begin to roll back. the mpr is likely to be held at its technical minimum over the next 24 months ; fcic funds are provided over a 4 - year horizon, and even short - term liquidity facilities will remain in place until early 2021. 16. still, some challenges remain on three fronts : a. lending to large corporations. for a number of years, big corporations have been tapping international and domestic corporate bond markets. they faced the covid - 19 crisis with rather sizeable cash holdings from bond issuing in the first quarter and the drawdown of bank credit lines. yet this liquidity will not last forever. reactivating the corporate bond market is key to prevent largescale corporations from crowding out smes from access to bank lending. the government and the cmf have adjusted regulations to speed up bond issuing and the central bank asset purchase program is likely to trickle down to corporate bonds, but more government action may be needed in order to reduce risk over these assets. b. expanding non - conventional tools. right now, the central bank has limited reach in the asset market, since the constitution forbids it from buying treasury bonds even in the secondary market as well as nonfinancial corporate bonds. a constitutional reform is making good progress in congress to remove the first constraint. c. recovering private consumption and investment. consumer and firms ’ expectations have plummeted in the last eight months, responding to the social crisis, first, and to the risk - off mood of the covid - 19 pandemic, later. private consumption and investment are expected to drop 6 % and 12 % this year. uncertainty is feeding into prudential savings by households and firms, despite government transfers, debt rollovers and credit availability. the recent agreement between government and main opposition in congress that broadened the horizon of fiscal support and enforced a medium - term budget constraint may help foster confidence. the expansion of central bank programs may operate in the same direction. 17. summing up, while chile has been hit hard by the covid - 19 pandemic, the economic policy response has been strong, consistent and sustainable over time. this may

jose de gregorio : inflation targeting and financial crises speech by mr jose de gregorio, governor of the central bank of chile, at the seminar on financial crises seminario internacional de crisis financieras, organized by banco de la republica de colombia and the fondo de garantias de instituciones financieras de colombia, bogota, 28 may 2009. i thank the valuable comments and insights of luis felipe cespedes, pablo garcia, luis opazo and enrique orellana. * * * thank you so much for this invitation. it is an honor to return after so many years to speak at a conference organized by banco de la republica and fogafin. the subject this time around, financial crises, is particularly timely, with the world struggling through a crisis whose effects are still difficult to predict and that has propagated through the world with unprecedented strength and synchrony ( figure 1 ). macroeconomic policies face major challenges in trying to cushion the effects of a crisis. its origin, magnitude and degree of propagation make stabilizing the economy a particularly complex task. high uncertainty and, in some cases, poor functioning of key aspects such as credit markets, have affected the monetary policy transmission channels in a number of countries. the current crisis is providing a unique opportunity to continue fostering the design of economic policy frameworks that permit us to react to different shocks in the best way possible while at the same time reducing the vulnerability of our economies. the current situation raises many questions, some of which we had already been discussing at the theoretical level. meanwhile, it contributes the necessary evidence to dig into such questions more deeply. although we must detect the flaws and fix them to prevent episodes like this to happen again, we must also identify what has operated properly and should continue to be part of our macroeconomic and financial policies. in particular, a proposition that permeates my presentation today is that the current turmoils have shown the advantages of inflation targeting regimes committed credibly with an inflation anchor. as the crisis we are going through keeps reminding us, price - level stability must occur hand in hand with proper regulation of the financial system. our region has learned these lessons the hard way, after severe crises that were created when we lost sight of macroeconomic and financial stability. in this juncture, the region has withstood like never before the effects of the international crisis. in the past, when the world got a cold, the region