Rodrigo Vergara: The Monetary Policy Report and the Financial Stability Report Presentation by Mr Rodrigo Vergara, Governor of the Central Bank of Chile, before the Finance Commission of the Honorable Senate of the Republic, Santiago de Chile, 3 December 2013. *  *  *  The Monetary Policy Report of December 2013 and the Financial Stability Report of the second half of 2013 can be found at http://www.bcentral.cl. Introduction Mr. President of the Senate’s Finance Commission, Senator Andrés Zaldívar, senators members of this Commission, ladies and gentlemen. I am grateful for your invitation to present the vision of the Central Bank’s Board on the recent macroeconomic and financial developments, its Outlook and implications on monetary and financial policy. This vision is contained in detail in our December Monetary Policy Report and our second-half Financial Stability Report we are presenting now. The macroeconomic scenario has evolved along the trends described in the latest Monetary Policy Reports. In the external scenario, growth is more balanced between developed and emerging economies than it was before the subprime crisis hit. International financial conditions are steadily normalizing, while the terms of trade are declining and approaching their trend values. In this scenario, the Chilean economy will receive a milder boost from abroad than we saw in recent years. The less expansionary monetary policies in the developed world will be coupled with a rebound in developed economies that will favor not only these countries but the world economy at large.
A second firewall is related to public institutions such as the Superintendences and the Central Bank, which have complementary roles in the monitoring, supervision and regulation of the financial system. The continual improvement of regulations and laws, as well as the search for best practices at the global level is one objective that must always be present in our actions. Within this monitoring role, our Financial Stability Report plays a key role. In it we identify developments which, if intensified, might create risks, or where we believe there is room to reduce residual risks. I would like now to describe some of these developments as well as the main regulatory amendments that have been implemented during the last six months. In our Financial Stability Reports a couple of issues ago we warned about some developments in the real estate sector which, if intensified, could become a source of risk. We were particularly concerned about the combination of dynamic prices with a credit acceleration originating in this sector. In this context, one good element is that mortgage credit growth has remained stable, with no relaxation of lending standards for mortgage loans or credit to construction and real estate firms. However, housing price indexes are as dynamic as in previous periods, in a scenario of high demand and low inventories. Meanwhile, the expected supply of office space continues to rise and is in historically high levels.