Figure 2 CPI inflation around the world (1)  Commodity prices (5)  (annual change, percent)  12  12  10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4 05  06  07  08  09  10  11  U.S.  Eurozone  Latin America (2)  Emerging Asia (3)  (monthly index, Jan.00-Sep.11=100)  250 200 150 100 50 0 00  02  Emerging Europe (4)  04  06  08  10  FAO foodstuffs WTI oil  (1) Regions weighted at PPP. Data through August 2011. (2) CPI includes Argentina, Brazil, Chile, Colombia, Mexico and Peru. (3) CPI includes China, India, Indonesia, Malaysia, South Korea, Thailand and Taiwan. (4) CPI includes the Czech Republic, Hungary, Poland, Russia and Turkey. (5) Data through September 2011. Sources: Bloomberg, CEIC Data, IMF and statistics bureaus of respective countries. BIS central bankers’ speeches  7  Figure 3 Inflation indicators (annual change, percent) 10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4 06  07  08  CPI  09  10  11  CPI excluding food and energy  Sources: Central Bank of Chile and National Statistics Institute (INE).
This lower growth, beyond the possible effects of the adverse external scenario, responds mostly to the economy converging to trendconsistent growth rates, which we estimate to be around 5%. We are facing a very complex external scenario. In last Thursday’s monetary policy meeting communiqué we said that the deepening of international economic trends could shape a more adverse scenario than the baseline assumed in the September Monetary Policy Report, with potential consequences for growth and inflation in Chile, as well as for the orientation of monetary policy. Accordingly, we are paying close attention to external developments and we have the necessary flexibility to act whenever necessary. However, I would like to pause to examine two aspects. First, it is important for monetary policy not to react too little, too late. But just as important it is that it does not act haphazardly. A monetary policy that keeps changing signs because of mistaken diagnoses loses credibility. Potential delays can be compensated by being aggressive. That was the case between end of 2008 and beginning of 2009. We could have reduced the rate a couple of months earlier, but because inflation was so high and the economic outlook was so uncertain, it could have hurt the credibility of our monetary policy. In this context, a policy rate cut would have ultimately been slower and less effective. Once  BIS central bankers’ speeches  5  the severity of the situation was confirmed, we reduced the rate with unprecedented force and with much success.