This is the main reason for the expansionary nature of our policy making in recent years, even with inflation being persistently above the target range. Keep in mind that the fiscal rule determines a generally acyclical public expenditure, meaning that it runs independent from the business cycle. Why? Because fiscal policy is typically slow to react and any change in spending decisions are much more difficult to undo. Thus, monetary policy is essential to deal with the economy’s cyclical fluctuations. That explains our actions. Since late 2013 we have implemented a clearly expansionary monetary policy, indeed one of the most expansionary among emerging market economies. Real short-term interest rates have been negative or barely above zero for all this time, helping medium- and long-term rates to be nearly as low as they have ever been. This policy has not only helped the economy to adjust smoothly by providing support to aggregate demand; by letting the exchange rate move freely it has also contributed to the adjustment of relative prices—a key element to address in these conjunctures. The contrast with other episodes is evident. Suffice it to recall the costs associated with the defense of the exchange rate in the early 1980s and, to a lesser extent, during the Asian crisis and its aftershocks in the late 1990s.
In the long run, countries are the masters of their own destinies, and behind those that developed and provided a better standard of living to their people are the good public policies they implemented. Ladies and gentlemen: in a few months I will be concluding the five-year term established by the Constitutional Law for the governors of the Central Bank of Chile. I believe that, although the past few years have been quite complex, the joint efforts of the Bank’s staff and Board members have helped us succeed in our mission. I take this opportunity to thank you for all your support during this period. Thank you. 7 / 14  BIS central bankers' speeches  8 / 14  BIS central bankers' speeches  9 / 14  BIS central bankers' speeches  10 / 14  BIS central bankers' speeches  11 / 14  BIS central bankers' speeches  12 / 14  BIS central bankers' speeches  13 / 14  BIS central bankers' speeches  14 / 14  BIS central bankers' speeches