Furthermore, global financial conditions are still favorable, partly because the main central banks continue to carefully and gradually withdraw their large monetary stimuli, helping to keep interest rates and term premiums low. In addition, capital has continued to flow to emerging markets and the prices of various assets are high. Commodity prices, in general, remained above the levels foreseen in September, especially copper and energy sources (figure 8). The copper price rose 3.5% to USD 3.2 per pound during the period, to settle around USD 3.1 at the closing of this Report. This behavior is common to most metals, in a context of still high pressures coming from financial factors and improvements in some fundamentals. Among the latter, the increase in demand and perspectives is worth noting, something that has occurred thanks to increased global industrial production and the performance of the Chinese economy. This, combined with some stabilization in output, has gradually reduced inventories. Beyond recent movements, the weakening of the US dollar during the year has also been sustaining the copper price. Thus, the baseline scenario in this Report adjusts it to USD 2.95 and USD 2.75 per pound on average for 2018 and 2019, respectively. Regarding oil, the prices of Brent and WTI rose a 2  An abbreviation from its Spanish Indice Mensual de Actividad Económica, literally Economic Activity Monthly Index. 4  significant 20% in the period, to near USD 63 and 56, respectively, explained largely by a somewhat more balanced market.
In the long run monetary policy is only capable of influencing inflation; a systematically higher rate of inflation, however, would not lead to higher long-term growth. The level of long-term growth is determined instead by real economic factors such as demographic changes, technology, education and the efficiency of markets. In so far as a long-term relationship between inflation and growth does exist, most of the evidence suggests that, if anything, higher inflation impairs the workings of the economy and thereby weakens output. Today there is widespread - though not yet complete - agreement on this. What monetary policy can do, on the other hand, is influence the economy’s fluctuations around the long-term trend, albeit without any lasting effects on growth. This means that if resource utilisation is low or high, monetary policy can be used to stimulate or dampen activity temporarily, but not to fine-tune the economy. With an inflation target which applies downwards as well as upwards, so that deflation as well as inflation are avoided, monetary policy can then exercise a stabilising influence and help to smooth economic fluctuations around the long-term trend. Problems arise if resource utilisation becomes so high that inflation starts to accelerate and the central bank has not intervened. People may then begin to count on inflation remaining high in the longer run. A higher level of inflation may then be established, whereas the effects on production and employment will be only temporary.