A key element for the convergence of inflation to the 3% target within two years is that the significant imbalances that accumulated in the economy in 2021 are further resolved. In the central scenario, in 2022 and 2023 the economy will grow below potential, with the activity gap narrowing gradually and remaining negative for some quarters. This will be compounded by a slow reduction in the international prices of fuel and foods from their current levels and a declining real exchange rate (RER), but still remaining above its averages of the last 15 to 20 years (figure 11). It is important to note that this projection does not consider changes in the structural parameters of the Chilean economy, which we are currently updating and will make available later in the year. The liquidity that remains from the stimulus measures adopted in 2021 will continue to sustain consumption in the immediate future. However, most fundamentals suggest that it would weaken in the second half of the year. In the labor market, job creation continues, but has slowed down compared to previous months and with lower real wages, in a context in which the unemployment rate remains below 8%. The financial conditions faced by households have tightened, because of both higher interest rates and stricter credit requirements. Accordingly, coinciding with the effects of inflation on households' purchasing power, consumer expectations have deteriorated sharply in recent months, with worsening perceptions of employment, inflation, and purchases of goods.
News conference  Berne, 14 December 2017 Andréa M. Maechler  Introductory remarks by Andréa M. Maechler  I will begin my remarks with a review of the situation on the financial markets, before going on to discuss the progress made in reference interest rate reform. Situation on the financial markets  Let me start with developments on the financial markets. The monetary policy pursued by the large central banks was once again the focus of attention for the financial markets in the second half of the year. Given moderate inflation growth, financial market participants are expecting only a very gradual normalisation of monetary policy across the world. Against this backdrop, government bond yields have remained persistently low. Muted expectations regarding a move away from expansionary monetary policy, coupled with favourable economic data and good corporate results, have contributed to largely positive risk sentiment on the financial markets. This has been reflected, for instance, in a stock market rally, lower yield spreads on corporate bonds and reduced demand for safe-haven assets such as the Swiss franc. In this positive market environment, volatility has remained low and volatility for the US equity and bond markets, calculated using option prices, has dropped to record lows (cf. chart 1). Despite positive economic data in Europe, European stock indices have risen only moderately. The Stoxx Europe 600 has climbed some 3% since mid-year. One reason for the modest stock market performance in Europe is the strengthening of the euro, which impaired corporate earnings growth somewhat.