All this has aggravated fears of a sharper slowdown in trade, a deterioration in the confidence of companies and households globally and a loss of dynamism in global activity. And there is also a resurgence of the possibility of a no-deal Brexit. Scenarios where these risks intensify could lead to an abrupt deterioration of financial conditions. In view of this, the main central banks are likely to make their monetary policies more expansionary; however, this could be insufficient to contain the loss of appetite for risk and the decreases in the prices of assets and commodities. The high level that the prices of some riskier assets have reached—in some cases matched by increased borrowing—shapes a much more complex scenario. In addition, the materialization of any of these scenarios could have a negative impact on local investment decisions and expectations. At home, it is estimated that the balance of risks for activity is biased downward. The baseline scenario projects that, beyond the result of the first quarter, investment will see a significant recovery in the next two years, which includes both large-scale mining projects and investment from other sectors. However, there are risks derived, for example, from the greater uncertainty of the external scenario and the various costs associated with investment projects’ red tape. Also, worth mentioning are the risks coming from the mining sector. Although its poor performance of recent quarters has responded in part to specific factors, there are more permanent elements, such as the lower grade of mineral ore, that could prolong this weakness.
Thus, CPI inflation will end the year at 2.4% and the CPIEFE at 1.9%, both below June's forecasts. Going forward, core inflation is expected to fluctuate around 2% until mid-2018, heavily influenced by the effects of the recent peso appreciation, to gradually return to 3% thereafter. Meanwhile, as fruits and vegetables prices resume a similar dynamic to that of their historical averages, the CPI will return to the target by the second half of 2018. As I mentioned, this trajectory is based on the RER depreciating slightly over the projection horizon (figure 10). 5  As usual, a number of internal and external elements represent risks to these projections. Abroad, an ongoing concern is how the financial markets will respond to the monetary policy strategies of the main central banks of the developed world. After several years of highly expansionary monetary conditions, the economies have closed—or are on their way to close—their gaps and it is natural for monetary policy to begin to normalize, both in its more (rates) and less (balance sheet) conventional aspects. This entails risks because of the unprecedented timing and gradual pace of the process and its differences with market expectations. In the United States, there's also the doubts about fiscal management and its effects on growth, interest rates, and asset prices in general. Add the concerns about whether the recent low inflation figures in several developed countries are one-time or rather systematic events, plus risks associated with recent geopolitical tensions.