Figure 8  BCS: causes behind changes in lending standards (1)  (index, moving four-quarter average)  Big enterprises' demand  30  Substitution of funding sources  15 0  Households' supply (2)  30  10  15  0  0  -10  10 Competition other entities  0 -10  Other  -15  Working capital  -15  -20  -30  Mergers/acquisitions  -30  -30  -45  -40  -40  -60  -50  -50  -75  -60  -45 -60  Fixed asset investment  -75 14  15  16  17  -20 Regulatory changes  -30  Risk (npl, default, other) 14  15  16  -60 17  (1) Index measures net relative importance attributed by banks to credit demand and supply determinants, respectively. For more detail, see Banking Banking Credit Survey. (2) Average between housing and consumer Source: Central Bank of Chile.
That a period of relative price stability does not breed complacency? That the collective national memory is maintained? A key part of the answer can be found in the role of regimes and institutions.5 Individual policymakers and officials come and go. Intellectual ideas pop in and out of fashion. The inflation target and the MPC are the result of a long and painful search for a credible money anchor. They provide the memory to ensure that we don’t return to the inefficiency and inequity of the 70s and 80s. They provide the memory that underpins the consensus that low and stable inflation is a perquisite for economic prosperity. And they provide the memory that guards against some of the dangerous talk of late. Let me sum up this section on the twin objectives of monetary policy. The MPC has objectives for growth as well as for inflation. The current inflation targeting regime provides considerable flexibility for the MPC to support output and employment. And in recent years, the MPC has used that flexibility to the full. Indeed, some have argued excessively so. The MPC has been at the forefront in supporting growth and employment and continues to be so. But that flexibility is constrained by the discipline that monetary policy must be set in a manner consistent with inflation coming back to its target. Without that credibility, monetary policy wouldn’t have the flexibility to support the real economy.