Our contribution as the Central Bank is to keep inflation low and stable. Also to help, within the scope of our powers, to identify and deal with any risks that may jeopardize the normal functioning of our financial system. Thank you. BIS central bankers’ speeches  7  Figure 1 Inflation indicators (annual change, percentage) 10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  -6  -8  -8 06  07  08  CPI  CPIEFE  09  10  CPIEFE goods  11  12  CPIEFE services  Sources: Central Bank of Chile and National Statistics Institute (INE). Figure 2 Gross Domestic Product (annual change, percentage) 5.5  5.5  5.0  5.0  4.5  4.5  4.0  4.0  3.5  3.5 Dec. 11  Mar. 12  EES GDP 2012  Jun. 12 Range MP Report  Sep. 12  Dec. 12  Dec. MP Report forecast  Source: Central Bank of Chile.
Output, meanwhile, grew 5.7 percent y-o-y in the third quarter of 2012, flat from the previous quarter, but more than expected. The Economic Expectations Survey (EES) of August – available at the closing of the previous Monetary Policy Report – forecast 4.6 percent growth for said quarter. The greater increase was due to better performance in general. However, output’s velocity of expansion dropped from 8.3 to 5.7 percent annualized. In the baseline scenario, the Board estimates that GDP will grow 5.5 percent this year. This projection is higher than the ceiling we estimated in September, with a similar revision as has been made in private forecasts. Still, both our forecasts and private ones have experienced sustained upward revisions in the past year (figure 2). On the domestic spending side, third quarter growth (i.e. 8.0 percent y-o-y) largely surpassed second-quarter figures, however swollen by some specific factors. While every component of expenditure posted higher increases, the large increase in machinery and equipment investment is worth noting: 19.9 percent y-o-y. The acceleration of domestic spending amplified the negative current account balance, which in the third quarter went to 2.9 percent of the GDP accumulated in the last year. The baseline scenario assumes that the deficit will end the year 2012 at 3.8 percent of GDP, exceeding September’s forecast of 3.2 percent. Meanwhile, the national financial system has operated normally in a context of strong investment and favorable external credit conditions.