Likewise, business and consumer confidence surveys show increased concerns about inflation. BIS central bankers’ speeches  3  As usual, there are various risks that could shape a different macroeconomic scenario. On this occasion, the Board believes the risk balance for both inflation and output is biased upward. The main risk to inflation has to do with the size, persistence and propagation of the shock to commodity prices, especially oil. Internationally, as I said, the baseline scenario assumes that the oil price will be high and fairly stable. However, it may happen that the political tensions in some oil-exporting countries continue or intensify, resulting in a steeper upward trend. The global effects of such a setting are clearly inflationary in the immediate future, while further down the line its combined effects on world demand and interest rates may moderate world economic activity (table 3). In the case of foodstuff prices, current aggregate indexes are above their peak of 2007–2008, although the composition of products showing the bigger increases differs. In any case, the velocity of these hikes has been greater than that of the last episode (figure 12). Both futures prices and analysts’ projections assume that the prices of these products will not increase further but will rather tend to normalize. Still, it cannot be ruled out that if supply-side problems in the agricultural sector persist within a context of strong growth in emerging economies, pressures on the prices of foodstuffs may be intensified.
For 2011, the world growth forecast assumed in this Report’s baseline scenario is three decimal points higher than in December. Financial tensions relating to the situation in some European  2  BIS central bankers’ speeches  economies are still in place. The catastrophe in Japan has sounded an alarm, but so far its effects are believed to be limited primarily to the Japanese economy (table 1). In Chile, output gaps have behaved as predicted, leading to a normalization of the inflation trend. As I said before, in 2010 GDP grew 5.2 percent, so we believe output gaps are closed (figure 6). The strength of domestic demand, particularly for consumption, has been at the center of this phenomenon. Labor gaps have narrowed, with a fast increase in employment and higher wages. This performance of the economy reflects to a great extent the impulse of monetary policy to domestic expenditure and the world’s economic recovery. For 2011, the Board foresees that GDP growth will be in the range of 5.5 to 6.5 percent, the same it forecast in December (table 2). This scenario is coherent with output gaps remaining closed over the entire projection horizon. The recent dynamism of the economy will moderate in line with the reduced impulse from macroeconomic policies. As for monetary policy, our projections use as a working assumption that the MPR will follow a path that is comparable with the one that can be inferred from the various expectations surveys (figure 7).