MONETARY POLICY REPORT PRESENTATION BEFORE THE FINANCE COMMISSION OF THE HONORABLE SENATE OF THE REPUBLIC  Mario Marcel Governor Central Bank of Chile 1 April 2019    The Monetary Policy Report of March 2019 can be found at http://www.bcentral.cl. I. Introduction  Mister President of the Senate’s Finance Commission, Senator Ricardo Lagos-Weber, Senators members of this Commission, ladies, gentlemen, I am grateful for your invitation to present the vision of the Board of the Central Bank of Chile on recent macroeconomic developments, their prospects and the implications for monetary policy. This vision is contained in detail in the Monetary Policy Report (IPoM) of March 2019, released this morning. These antecedents provide the background for the decision adopted by the Board at the Monetary Policy Meeting last Friday. At that Meeting, we decided unanimously to keep the Monetary Policy Rate (MPR) at 3%. At the same time, we noted that, in line with the lower level of inflation and its outlook, it would be necessary to maintain the monetary stimulus for a longer period, taking a break in the process of MPR normalization that began last October. To the extent that the economy continues on the foreseen path, this process should be resumed in the medium term to ensure the convergence of inflation within the policy horizon. This decision is coherent with the analysis and baseline projection scenario that I will share with you now.
8  Figure 1 Accumulated inflation, February - December 2018  Evolution of CPI and CPIEFE inflation (1) (2)  (percent)  (annual change, percent)  CPI  2.5  CPIEFE  2.5  2.0  2.0  1.5  1.5  4.5  4.0  4.0  3.5  1.0  1.0  4.5  3.0  3.0  2.5  2.5  2.0  2.0  1.5 0.5  0.5 0.0  Basket Basket 2013 2018  Basket 2013  Basket 2018  1.5  CPIEFE  1.0  0.0  3.5  CPI  1.0  0.5  0.5  0.0  0.0 18  Abr. Jul. Oct.  19  (1) As from January 2019 the lines use the new indexes with annual base 2018=100, so they are not strictly comparable with earler figures. (2) Blue (red) diamonds show the annual CPI (CPIEFE) variation using the 2013=100 basket. As from February 2018, they show the annual change that is obtained by splicing the 2013=100 basket series with the monthly variations in the 2018=100 basket. Sources: Central Bank of Chile and National Statistics Institute (INE). Source: National Statistics Institute (INE). Figure 2 Exchange rate and goods EFE (annual change, percent)  6  30  5  25  4  20 TCN (right axis)  3  goods EFE (*)  2  15 10  1  5  0  0  -1  -5  -2  -10  -3  -15 16  16 Jul.