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 June 2015. *  *  *  Accompanying charts can be found on the Central Bank of Chile's website. The Monetary Policy Report of June 2015 and the Financial Stability Report of the first half of 2015 can be found at http://www.bcentral.cl. Introduction Mr. President of the Finance Committee of the Senate, Senator Andrés Zaldívar, senators members of this Committee, ladies and gentlemen. Thank you for inviting me to share the vision of the Board of the Central Bank of Chile on recent macroeconomic and financial developments, their prospects and implications for monetary and financial policy making. This vision is contained in detail in the Monetary Policy Report of June 2015 and the Financial Stability Report of the first half of 2015. The macroeconomic scenario shows minor changes with respect to forecasts in March. Annual inflation declined between February and April, but it remains above 4%. Output and demand continue to grow at a moderate pace, and the first quarter was better than expected, but incoming data suggest that the remainder of the year will be somewhat less dynamic than previously estimated. In the global economy, the growth outlook showed no major changes either. The weaker US figures early in the year and the consolidation of better prospects in Europe are worth mentioning.
This was visible in private and public consumption, and in investment in construction and other works, with the resulting increase in growth in construction, trade and some services. However, March figures and incoming indicators suggest that the recovery of  BIS central bankers’ speeches  1  growth in the remainder of the year will be somewhat slower than expected. This is reflected by several indicators, such as retail sales, imports of consumer goods and business and consumer expectations. Particularly worrisome is the possibility of consumer and business confidence remaining in clearly pessimistic territory, a situation that, if not reversed, will hinder the recovery of growth in the second half of the year (figure 3). The evolution of credit also reflects weak private spending. Annual growth of consumer and commercial loans is still bounded, despite the low interest rates. Job creation in the private sector has also been in line with the economic slowdown. Hiring in the most cycle-sensitive sectors, such as manufacturing and construction, post negative y-oy rates of variation, which however have moderated in recent months. Nevertheless, the stronger increase in employment in agriculture and services, especially some linked to the public sector, has led total employment to grow by about 1% annually. The unemployment rate remains low, because the slower employment growth is matched by also slower growth in the labor force (figure 4). Nominal wages continue to grow strongly, slightly more than 7 percent. The empirical evidence suggests that this owes mainly to the indexation to higher past inflation.