Still, this is an important risk for inflation, particularly because of the potential propagation effects it might cause, and it calls for close monitoring and follow-up. The CPI will end this year with a variation of 2.8% (table 3). Going forward, the absorption of output gaps and increased food prices suggest that annual inflation will stay near the target until the end of the projection horizon, this time the fourth quarter of 2012. The path of normalization of the CPIX and the CPIX1 will be slower. They are forecast to converge to the target only towards the end of next year, to stay there for the remaining part of the projection horizon. Market inflation expectations, in line with this scenario, remain at 3% in the medium term. However, for the near future reduced inflation figures are foreseen (figure 9). In addition to the already mentioned assumptions about output gaps and higher prices of foods and commodities, imported inflationary pressures are assumed to be well contained. Also, nominal wages are expected to be adjusted in accordance with the economy’s stage of the business cycle and inflation dynamics. As I said last Tuesday in my visit to the full Senate, the Chilean peso has been gaining value against the dollar since our latest IPoM, although not as strongly as it did between June and  BIS central bankers’ speeches  3  September.
On the one hand, the recovery of developed economies goes on, but only moderately and insufficiently to reduce the high rates of unemployment (figure 1). Risks are substantial. In fact, the intensity and velocity of the events we saw in Europe in early November are proof of the fragility of the world economy. On the other hand, growth prospects in emerging markets are still positive; commodity prices are still high, with copper standing out recently at record highs, and external financing conditions are good. The sustainability of this imbalanced scenario for the global economy is one of the primary risk factors for next year. Some of the questions we must try to answer and monitor closely are: How fast can emerging economies grow if the advanced economies are further weakened? How can advanced economies grow without incurring in unsustainable current-account deficits? How will the financial tensions in Europe be resolved? Is it possible for expenditure in Chile to grow excessively while ignoring the risks coming from abroad? In this context, the Board has continued to gradually normalize the monetary policy interest rate (MPR), setting it at 3.25% in its December meeting. In the most likely scenario, it will continue to gradually withdraw the monetary stimulus, which will depend on the unfolding of internal and external macroeconomic conditions. Let me now take a closer look at the scenario we believe is the most likely for the next two years and its implications for inflation and monetary policy. Macroeconomic scenario I will begin with the world economy.