Because the normalization process is expected to proceed gradually, it can be anticipated that monetary policy will remain expansionary still for some time, probably making it the longest period of continued monetary expansion since the adoption of the current monetary policy regime. The CBC will be prepared to act countercyclically if downside risks materialize in the external sector. 1  Let me now turn to the details of our baseline scenario and the related risks we see. In the second quarter, economic activity grew 5.3% annually, giving an important upward surprise with respect to June expectations (Figure 1). By sectors, the greatest differences were observed in non-mining activity, particularly trade, business services and manufacturing. Domestic demand also grew above expectations, reflecting a greater expansion of private consumption, an increase in inventory build-up and more dynamic investment in machinery and equipment. This dynamism was largely maintained in July’s monthly index of economic activity (Imacec). The non-mining component of this indicator posted an annual increase of around 4%, while its mining counterpart dropped by nearly 2% annually, due to some one-off adjustments in some operations. About the labor market, for several quarters its recovery seemed to lag behind activity, mainly because private salaried employment—which typically has a closer link with the business cycle—was stagnant. This phenomenon was not entirely unexpected given that the lags with which activity affects employment are variable, but anyway advised some caution regarding the strength and durability of the economic recovery. In recent months we have been reviewing this diagnosis.
Table 1 Domestic Scenario (variación anual, porcentaje)  2017  2018 (f) Jun.18 Report  GDP Mining GDP Non-mining GDP Domestic demand Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Goods and services exports Goods and services imports Current account (% GDP) Ahorro nacional bruto (% del PIB) Gross fixed capital formation  1.5 -2.0 1.8 3.1 1.8 -1.1 2.7 -0.9 4.7 -1.5 20.6 21.6  2019 (f) Sep.18 Report  Jun.18 Report  2020 (f) Sep.18 Report  Jun.18 Report  Sep.18 Report  3.25-4.0  4.0-4.5  3.25-4.25  3.25-4.25  3.0-4.0  2.75-3.75  4.1 3.7 4.5 3.6 5.2 6.7 -2.1 20.3 21.6  4.6 4.1 5.0 3.8 4.9 6.2 -2.2 20.3 21.7  3.9 3.6 4.5 3.4 3.4 3.8 -2.5 20.6 21.9  3.7 3.7 4.5 3.4 4.2 4.4 -2.6 20.5 22.1  3.5 3.6 3.9 3.5 2.5 2.6 -2.6 20.7 22.2  3.3 3.7 3.9 3.6 2.8 2.8 -0.3 20.5 22.4  (f) Forecast. Source: Central Bank of Chile.