This growth trajectory leans on three fundamental premises: First, the impulse we are receiving from abroad, although milder than we could have foreseen some years back, is not particularly low. Of course we would rather live in a world of higher copper prices and two-digit growth in China. But in hindsight, that was clearly 6  BIS central bankers’ speeches  unsustainable in time. Nevertheless, the world growth figures we see today and project for the next two years, do not differ much from what we saw in 2015. The terms of trade should tend to stabilize towards 2017 and external financial conditions are good by historic patterns. Surely we face risks, but don’t we always. Second, from a macroeconomic standpoint, our economy is well balanced. The external accounts are in good order, our fiscal policy is sound, inflation expectations remain well anchored and, beyond the importance of mitigating the risks identified in the Financial Stability Report, local financial markets are well equipped to contribute to that recovery. The third premise is the return of confidence. On this point let me digress. It is not a good sign for a goal of 3.5 percent growth to seem so elusive. Just a couple of years ago we believed that growth between 4.5 and 5 percent was possible. After all, in the last thirty years, the Chilean economy grew by an average of 5.2 percent annually. Certainly many things have happened in the last thirty years that can explain this.
As I said at the beginning, the annual variation of the Consumer Price Index excluding Food and Energy (CPIEFE)—our measure of core inflation that deletes the prices of food and energy from the CPI—has remained below 2%, with annual inflation still negative for goods and persistently around 3% for services. The CPI has approached 3%, mainly driven by the behavior of the more volatile prices (Figure 9). The peso depreciation has an effect on the revision of the short-term inflation outlook. By the end of this year, the annual variation of the CPIEFE is forecast to be at 2.7% (2.3% in June) and that of the CPI, at 3.1% (2.8% in June). Once both indicators converge to 3% during 2019, they will remain in the neighborhood until the end of the projection horizon (Figure 10). It is very likely that in September the annual CPI inflation rate will be temporarily above 3%, because of the low basis for comparison left by the unusual behavior of some foodstuffs in 2017. Regarding monetary policy, we think that the evolution of macroeconomic conditions makes it less necessary to maintain the current monetary stimulus. Therefore, our working assumption for the MPR is that it will begin to increase in the coming months and by 2020 it will stand near its neutral level—ie. between 4% and 4.5%. This assumption is not essentially different from the forecast a few months ago, as it implies gradual increases in the policy rate associated with the recovery of the domestic economy.