Far from over is also the concern about the way in which monetary policy makers in emerging economies will continue to deal with inflationary pressures. This is especially relevant in Asia, where some economies show signs of narrowing output gaps and growth rates above the trend. The possibility of a sharper adjustment in these economies’ growth rates, particularly in China, would impact world GDP and commodity prices. The IEF looks at these risks, and concludes that the biggest challenges for the Chilean financial system are associated to a prudent management of the favorable external financing conditions that should exist in the baseline scenario, but that might be reversed in many of the risk scenarios I have just mentioned. Accordingly, this Report puts special emphasis in evaluating the creation of risks associated with increased borrowing abroad by financial intermediaries and firms, especially maturity and currency mismatches and an overvaluation of key financial assets. This, within a context of gross capital flows that are relatively high by historic standards and compared with other emerging economies (figure 14). Our analysis of the present situation yields as its main conclusion that there is no evidence of vulnerabilities being created associated to gross capital inflows with systemic implications. With regard to enterprises, the IEF highlights that the bulk of the funds they get from abroad comes in the form of foreign direct investment (FDI), particularly profit reinvestment. Meanwhile, although the external debt has increased, the main financial ratios of the larger firms and the currency mismatches have been stable (figure 15).
Alan Blinder, former vice chairman of the Federal Reserve and now professor at Princeton University, argues that “a central bank that speaks with a cacophony of voices may, in effect, have no voice at all”. 29 There is also another argument in favour of unanimous decisions. Central banks are important social institutions, which should not be too closely linked to individuals but have a  27  See Alan S. Blinder (2007): “Monetary policy by committee: Why and how?”, in European Journal of Political Economy, 23, no. 1, pp. 106-127 and Alan S. Blinder (2008): “On the design of monetary policy committees”, Norges Bank Working Paper, 2008/6. 28  The Executive Board at Norges Bank consists of seven members, appointed by the King in Council. The Governor and Deputy Governor serve as chairman and deputy chairman, respectively, of the Executive Board. They are appointed to full-time positions for a term of six years. The other five members are appointed for four-year terms and are not employees of Norges Bank. 29  Alan S. Blinder (2007): “Monetary policy by committee: Why and how?”, in European Journal of Political Economy, 23, no. 1, p. 114. BIS Review 140/2009  7  public identity. The institution and its mandate should take precedence over the individuals who occupy positions for limited periods. 30 There is no formula for deciding which system is best. Each system has its strengths and weaknesses. Detailed meeting minutes ensure accountability among committee members. This may give rise to good incentives.