All of this points at more favorable current-account balances in the medium term. Anyway, for the purposes of assessing this risk we also need to review the evolution of the deficit measured at trend prices. In this sense, news is pointing in the right direction, because the estimate for this year went from 5.7% of GDP last March, to 4.9% in this Report. We estimate that in 2014 it will continue to recede to 4.6% of GDP. The international economy is undergoing a normalization process that influences the Chilean economy. This means a lower external impulse, with more balanced world growth between developed and emerging economies, terms of trade approaching their long-term level and global financial conditions more in line with historic patterns. A smaller boost from foreign investment is also to be expected – especially in mining –, which will take pressure off the current-account deficit and the use of internal resources. Monetary policy is well equipped, if so required, to back this adjustment process. The Board follows closely the evolution of the external and domestic macroeconomic scenario and its implications on inflation, and reaffirms its commitment to conduct monetary policy so that projected inflation stands at 3% over the policy horizon. I would like to end by sharing with you some final thoughts. Final thoughts We have been 19 months with the same monetary policy interest rate. And as with the exchange rate, during this time we have received the most diverse recommendations and suggestions from the market.
While recognizing that overreactions can occur in the short term in either direction that could warrant such an intervention, we need to be aware that it entails carry costs for the Central Bank and affects the overall economy. Focusing on keeping inflation near the target and preserving the flexibility of the exchange rate in times of bonanza allows the peso to accommodate conditions like the present ones and adjust more efficiently to the new situation. We also know that exchange rate flexibility plays a critical role in preventing currency mismatches, which have taken such a great toll elsewhere in the region and in Chile in the past. Overall, the appreciation of the peso that we saw a few months back was milder than that of other currencies, so now the depreciation has not been as sharp either. Domestically, monetary policy has continued to face many short-term challenges. The sound economic slowdown we were expecting has been gradually occurring. On the expenditure side, however, consumption continues to be very strong, boosted by labor market conditions. Actually, the latest indicators confirm the strength of the labor market. The information we have reviewed for this Report suggests that this component of domestic demand will moderate in the coming quarters, but we must not overlook the risk of a slower than expected adjustment of consumption, affecting the use of domestic resources and the deficit of the current account of the balance of payments.