Nor can we rule out that the passthrough of previous rises in world prices to domestic ones, especially for foodstuffs, may continue. Other risks have not changed materially. Incoming news confirm a scenario of very dynamic domestic demand, particularly for consumption, and employment (figure 14). Also wage growth has speeded up and credit is recovering fast. The domestic economy is growing strongly and output gaps are closed. Nonetheless, it is still early to predict an overheating. Actually, the various core inflation measures are still below 3% (figure 15). Output is near full capacity and, mirroring the rest of emerging economies, excess domestic demand is being redirected to imports. The current account still shows a surplus, largely because of good export prices, but also because of steadily increasing volume sales abroad. Furthermore, monetary policy works with a lag, so it is likely that the full effects of the 450-basis-point increase in the MPR since June of last year will not be seen for some time. The information we will be getting in the coming months will give us a better sense of the magnitude of these effects. Overall, the negative implications of these risks materializing led us to speed up the pace of monetary policy normalization in the past few months. Last week we actually raised the MPR by 50 basis points to 5%. Although the median of market expectations was foreseeing a somewhat smaller increase, we acted preventively to hold down the dynamism of domestic demand and the propagation of adverse supply shocks.
BIS central bankers’ speeches  7  Figure 3 Output gaps (*) (percent) 4  4  2  2  0  0  -2  -2  -4  -4  -6  -6 97  99  01  Developed economies  03  05 Emerging Asia  07  09 Latin America  (*) OECD estimates are used for output gaps in developed economies. For the other regions, output gaps are obtained using an HP filter. Sources: Central Bank of Chile based on Bloomberg, Consensus Forecasts, OECD and the respective country’s statistics institute. Figure 4 Current-account balance (billions of dollars) 1.500  1.500  1.000  1.000  500  500  0  0  -500  -500  -1.000  -1.000  -1.500  -1.500 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10  Rest of the world  Oil exporters  Emerging Asia  China  Japan  United States  Eurozone  Source: International Monetary Fund, April 2011's WEO.