José De Gregorio: Chile’s approach to external turbulences and threats Speech by Mr José De Gregorio, Governor of the Central Bank of Chile, at the “Economic and Entrepreneurial Vision 2011–2012”, organized by the Manufacturers Association SOFOFA and Universidad del Desarrollo, Santiago, 19 October 2011. *  *  *  I thank the valuable comments of Luis Álvarez, Luis Óscar Herrera and Enrique Orellana. In the past several years we have endured macroeconomic turbulences of unbelievable magnitude, as well as new challenges. The years 2007 and 2008 saw a sharp increase in inflation, then came the global financial crisis and the recession of 2009, to be topped off by an earthquake and a tsunami in February 2010. Today we can say that we weathered this string of difficulties but we remain on the alert, because the threats from the world economy are far from over. These days, our greatest concern is the state of the developed economies and its ramifications on the emerging world and particularly Chile. In mid-2009, the world economy began to recover from the effects of the international financial crisis. However, such recovery featured two different speeds (figure 1). The emerging economies have grown strongly and have had to deal with risks of inflationary pressures and fast credit growth, while the developed economies have recovered slowly. Since the middle of last year, we have stated in our Monetary Policy and Financial Stability Reports that there are many risks still latent.
year  -0,5  0,0  vs. 15 July  Chile: Nominal interest rates (percent) 6,5  6,5  6,0  6,0  5,5  5,5  5,0  5,0  4,5  4,5  4,0  4,0  jun.11 Jun.11  BCP-2  ago.11 Aug.11  BCP-5  oct.11 Oct.11  BCP-10  (1) Change in nominal interest rates of 10-yr generic bonds, unless otherwise stated. Changes at 18 October 2011. (2) 10-yr BCP rates calculated by the Central Bank of Chile. Variations at 17 October 2011. (3) 15-yr generic bond rates. Sources: Central Bank of Chile and Bloomberg. 14  BIS central bankers’ speeches