We could, in principle, go further than we have, and deliberately aim off in our monetary policy, in order to try to relieve the immediate pressure on the euro-exposed sectors. But that would necessarily involve taking more risk with our inflation target and with continuing stability in the economy as a whole. That is not consistent with our mandate. And it is not something that most business people I speak to - even from the suffering sectors - would want us to do. 3  BIS Review 98/2000
In principle, a “simple” alternative would be to set a large fund to guarantee the European sovereign debt and help recapitalize the banks. Its sole existence would reinstate confidence, reduce risk premiums and restore the viability to sovereigns and financial institutions. The trouble is that the European legislation does not have the institutions to implement these solutions. And they must define the fiscal support that such measures would require and how to allocate the burden among the participants. It is precisely on these fronts that the authorities are working and hopefully a solution can be arrived at in the short term. Otherwise, the European situation will continue to hold the world under a lot of pressure still for some months. Moreover, some countries in the Eurozone are facing serious competitiveness problems, thus depressing growth and, since they have no foreign exchange mechanism, solving them will take time because it requires flexibility and structural reforms to boost productivity. Monetary policy implications Today, in Chile, the expected course of the economy and monetary policy has changed from the beginning of the year. The focus is now on the effects that the weak global economy will have on the Chilean economy, especially on growth and inflation. About the former, we said in our last Monetary Policy Report that Chile’s growth would be in the 6.25%–6.75% range this year, to decline in 2012 to 4.25%– 5.25%.