BIS Review 9/2010  13  Figure 13 Nominal exchange rate and NDF position 700  10  650  9  600  8  550  7  500  6  450  5  400  4  Jan.09  Mar.09  May 09  Jul.09  Sep.09  Nov.09  NDF position (billions of $  NER $ Source: Central Bank of Chile. Table 3 Inflation (annual change, percent) 2008  2009 (f)  2010 (f)  2011 (f) 2.7  Average CPI inflation December CPI inflation CPI inflation in around 2 years (*)  8.7 7.1  1.6 -1.4  1.0 2.5  Average CPIX inflation December CPIX inflation CPIX inflation in around 2 years (*)  8.4 8.6  2.8 -1.5  0.3 1.9  2.5  Average CPIX1 inflation December CPIX1 inflation CPIX1 inflation in around 2 years (*)  7.8 7.7  2.8 -0.6  0.8 2.1  2.6  3.0  3.0  3.0  (f) Forecast. (*) Inflation forecast to the fourth quarter of 2011. Source: Central Bank of Chile.
Furthermore, as suggested by these projections and private expectations, in the fourth quarter the GDP will post a positive annual growth rate. Annual inflation, in turn, is expected to begin rising and become positive during the first half of 2010. Our financial system has been able to weather the external turmoil and the Central Bank has taken actions to avoid inconveniences in the provision of liquidity and implemented a highly expansionary monetary policy, not just reducing the policy rate to its lowest possible. However many risks are still there and we must be extremely careful in our decisions. The economy is beginning a recovery process that is yet to be well grounded. Output gaps are significant and will close gradually; probably taking more than the next two years. Inflationary pressures are generally low. We have said in our communications that we will hold the policy rate at its lowest at least until the second quarter of 2010. However, it is not a mechanical commitment in the sense that after that time we will begin to withdraw the monetary impulse. Experience has taught us the importance of moderation, and a hasty withdrawal could severely hinder economic recovery and jeopardize convergence to the inflation target. As in earlier occasions, our inflation-targeting regime and the credibility it has earned allow us to handle monetary policy very flexibly. Accordingly, we reiterate that the Board will use all the policy tools at hand so that projected inflation stands at 3% over the policy horizon.