Stock exchanges have dropped significantly at the global level (figure 8). To this is added, to a lesser extent, the strengthening of the dollar against some currencies, and the strong appreciation of gold and the Swiss franc, also used as safe havens. Finally, it is  BIS central bankers’ speeches  3  worth mentioning the decline in commodity prices, with the exceptions of agricultural goods and, again, gold (figure 9). Domestically, some variables of local financial markets have felt the external turmoil. The Stock exchange has experienced significant setbacks and interest rates on Treasury and Central Bank documents have fallen sharply (figure 10). The money and interbank markets have continued to operate normally, and liquidity conditions in both dollars and pesos have been unaffected by the increase in interbank premiums in developed markets. The peso, with swings, stands now close to its levels at the statistical cutoff of June’s Report. In light of these developments, output figures for the second quarter and advanced indicators for the third – which are still weak in developed economies – , the baseline scenario revises downward by 0.2 percentage points the world growth estimate for 2011, and by half a percentage point the one for next year (table 1). The biggest change is for the U.S., where, aside from the low growth seen thus far, there is the incidence of foreseeable fiscal adjustments after the approval of the higher limit for public borrowing. Growth in the Eurozone is still expected to be slow.
In the baseline scenario I will present to you in a moment, we assume that the effects of the external scenario will be limited, and the Chilean economy will grow close to its trend, with inflation near the target. Now I will describe the factors that shape this baseline scenario and the implications of the risks I have mentioned. Macroeconomic scenario In Chile, the dynamism of output and demand moderated further during the second quarter, although somewhat less than had been forecast in June. Inflation, meanwhile, was slightly below expectations of a few months earlier. Headline y-o-y inflation has hovered around 3 percent, while the annual growth rates of core measures remain contained (figure 6). The inflation outlook has been characterized by limited transmission of food prices to the local market. Similarly, the propagation of the price increases of these goods and fuels to other prices has been in line with projections. As I said a while ago, the external scenario has brought important news, with the materialization of some of the risks considered in the last quarters. This, coupled with prospects of slower growth in developed economies and concerns about the debt spreading to Central Europe, has had a significant impact on global financial markets. The sovereign spreads of several Eurozone members, like the premiums of some banks, are in all-time highs (figure 7). Asset prices have seen substantial changes, where worth noting is the decline in interest rates on long-term T-bonds of several developed economies that act as safe havens.