Secondly, in Chile banks cannot hold substantial off-balance-sheet positions, because the General Banking Act expressly indicates what kind of firms the banks may establish, such as mutual fund administrators or securitizing firms. These firms, that the law terms affiliates, must have a single line of business and are banned from investing in other companies. In addition, banks must submit their consolidated financial statements on a monthly basis. Moreover, banks may not take positions in credit derivatives, and face other restrictions regarding the operation of derivative instruments. In particular, to operate with interest rate or foreign exchange rate options, banks must undergo a thorough test by the SBIF, while holding uncovered positions in the balance sheet are costly in terms of capital requirements. But not only regulators and policy-makers learned the lessons from our financial crisis. Enterprises did too. Thus we haven't seen the massive currency speculations where so many firms in the emerging world were involved through the use of exotic derivatives that were not only complex but also very difficult to price. 10  In De Gregorio (2001), I discuss these points in connection with the first intervention period of 2001, and in De Gregorio (2006) I do so in the context of inflation targets and financial stability. 6  BIS Review 150/2008  In the present juncture we still face a severe inflationary challenge.
In view of the direct and indirect effects of these developments, we revised the end-2015 inflation forecast down by 0.6 percentage points compared to the previous reporting period. In food prices, we left the end-2015 inflation forecast unchanged at 9 percent. Our medium-term projections are based on the assumption that tax adjustments and administered prices are consistent with inflation targets and automatic pricing mechanisms. The medium-term fiscal policy stance is based on the Medium Term Program projections covering the 2015–2017 period. Accordingly, we assume that a tight fiscal stance will be implemented and the primary expenditures to the GDP ratio will decrease gradually. 3. Inflation and the monetary policy outlook  Now, I would like to present our inflation and output gap forecasts based on the outlook I have described so far. Our medium-term forecasts are based on a framework that we will adopt a cautious approach to make the improvement in inflation outlook permanent and maintain the tight monetary policy stance by keeping the yield curve flat. Moreover, we assess that the annual loan growth rate will stabilize around the recent reasonable levels, also thanks to the macroprudential measures. Accordingly, we expect inflation to be, with 70 percent probability, between 4.1 percent and 6.9 percent (with a mid-point of 5.5 percent) at end2015 and between 3.2 percent and 6.8 percent (with a mid-point of 5 percent) at end-2016. We project inflation to stabilize around 5 percent in the medium term (Chart 18).