Anyhow, the real exchange rate is currently at levels believed to be consistent with its long-term fundamentals (figure 9). Accordingly, in a context of high uncertainty about the evolution of global exchange rates, the CBC will continue monitoring the impact of the exchange rate path on expected inflation in its monetary policy decisions. In this scenario, annual inflation will be in negative territory for some months, to gradually converge to 3% toward 2011, while the economy will grow between 4.5% and 5.5% in 2010 (table 2). This scenario is consistent with a gradual closing of output gaps, a necessary condition for inflation to return to 3%. If we consider that trend GDP growth will be in the 4%4.5% range in 2010, a figure estimated by the CBC and consistent with the opinions of the committee of experts that perform the estimation for the design of the budget, such a range seems not excessive but rather moderate to close the output gap. If growth falls short, the economy will not close the gaps and, therefore, inflation will continue dropping or will adjust at a much slower pace, which obviously would require a stronger monetary impulse. 4  BIS Review 145/2009  Final remarks We have suffered the worst financial-economic crisis in many years. The strength of the Chilean economy, rigorously built over a long time period, has allowed us to mitigate the costs of a crisis that in the past would have impacted us much harder.
José De Gregorio: What happened and where are we headed? Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the meeting Visión Económica y Empresarial 2009-2010, organized by SOFOFA and Universidad del Desarrollo, Santiago, 23 October 2009. *  *  *  I thank the federation of Chilean industry SOFOFA and Universidad del Desarrollo for inviting me once again to take part in this important annual event. When I was preparing this presentation, I realized I had two choices: one was to analyze the current situation in light of our latest Monetary Policy Report, which I already did in another public seminar and that may overlap other presentations you will hear today. The other was to take a longer perspective and examine how we came to where we stand today, how we sailed through the troubled waters of the world economy and where we are headed. I think this is the perfect audience to take this second option. To begin with, it is important to bear in mind that the Central Bank of Chile (CBC) complies with its mandate of safeguarding price stability via a monetary policy based on a flexible inflation targeting regime. The objective is to keep annual inflation around 3% most of the time. When deviations occur, monetary policy focuses on correcting them over a period of two years. In practice, in our discussions we estimate a path for the interest rate that is consistent with the inflation forecast 24 months ahead converging to the target.