José De Gregorio: Chile’s latest Monetary Policy Report Presentation by Mr José De Gregorio, Governor of the Central Bank of Chile, of the Monetary Policy Report before the Finance Commission of the Honorable Senate of the Republic, Santiago de Chile, 6 April 2010. *  *  *  Introduction Ms President of the Finance Commission Senator Evelyn Matthei, senators. I am grateful for this Commission’s invitation to the Board of the Central Bank of Chile to present our vision of the recent macroeconomic developments, prospects and implications for monetary policy contained in detail in our Monetary Policy Report of March 2010. In the past few years, the Chilean economy and macroeconomic policies have been subjected to unprecedented tension. First we suffered the consequences of a major inflationary shock caused by great increases in the price of foodstuffs and energy, with large and costly repercussions on the economy. In a country that had left the scourge of inflation behind, the population had to endure the rigors of price increases once again. The structural characteristics of our economy – small, open, and market oriented – with few distortions in its pricing mechanisms, contributed decisively to the international price shock being heavily transmitted to domestic prices. These same characteristics also contributed to the significant reductions in inflation that were observed beginning in late 2008.
(2) Figure above (below) 50 points indicates optimism (pessimism). Sources: Adimark, car association Asociación Nacional Automotriz de Chile, Central Bank of Chile, chamber of commerce Cámara Nacional de Comercio and ICARE/Universidad Adolfo Ibáñez. 8  BIS Review 61/2010  Figure 3  Lending interest rates (*)  Loans to firms and households  (moving four-week average, percent)  20  40  16  35  12  30  8  25  4  20  0  07  08 Commercial 30-89 days  (*) Weighted average rates. 09 10 Consumer over 3 years  (annualized change in the moving quarter of the nominal seasonally-adjusted series, percent)  30  30  20  20  10  10  0  0 -10 02 03 04 05 06 07 08 09 10  15  Consumer Housing  Commercial  Sources: Central Bank of Chile and Superintendence of Banks & Financial Institutions. Figure 4 Nominal exchange rate (indices, Jan/2/2006=100)  Real exchange rate (indices, 1986=100)  140  140  130  130  120  120  110  110  100  100  90  90  80  80  08 MER  09  10  MER-5  OER  120  120  110  110  100  100  90  90  80  80  70  70  88 91 94 97 00 03 06 09 1995-2009 average 1990-2009 average  RER  Source: Central Bank of Chile.