On the external front, relevant variables include volatility in international financial markets derived from uncertainties in the developed world in the short term, the Eurozone starting to recover, the modest expansion of the US economy, and disappointing growth in China. Although it might not affect the policy interest rate, the way in which the central government decides to continue financing its reconstruction and other programs could certainly affect other relevant interest rates, such as those on notes issued by the central bank. To contain the effect on the exchange rate of any massive inflow of US dollars into the local market, there is the possibility that fiscal authorities will arrange to sell those dollars directly to the central bank. The bank will then need to, at least partially, neutralize the expansion in monetary aggregates generated by these acquisitions of foreign currency to the Treasury. The latter could drive prices on central bank debt instruments down, therefore raising interest rates. Fiscal and monetary authorities coordinate their actions to reduce the effects of their policy measures to the least possible extent.
Created on 05 Sep 2013 Page 11 of 19 Monetary Policy Indicators 2010 2011 2012 2013 2014 2015 2016 2017 Policy Interest Rate (%, end of period) 3.12 5.25 5.00 4.75 5.00 4.75 5.02 5.29 Short-term Interest Rate (%, end of period) 11.76 12.43 13.51 13.65 12.40 12.45 13.27 13.76 Source: Historical data from selected national and international data sources. All forecasts provided by IHS Global Insight. Table updated on the 15th of each month from monthly forecast update bank (GIIF). Written analysis may include references to data made available after the release of the GIIF bank. Download this table in Microsoft Excel format Fiscal Policy The government announced budget for 2013, boosts education spending. Government spending is budgeted under the Structural Fiscal Surplus Rule. The government debt-to-GDP ratio has been steadily decreasing. President Sebastian Piñera announced The government announced budget for 2013, boosts education spending. Chile’s budget for 2013 on 30 September 2012. The budget include a USD1.2-billion increase in education spending and university grants, amounting to USD12.8 billion total education spending—a 9.4% increase in real terms. Public spending thus increase 5% relative to that projected for 2012. Total social spending will amount 68.3% of total spending. Priority areas include health (with the construction of eight new hospitals), social welfare, citizen security (which increase the number of and police officers), business and innovation, and greater autonomy for Chile’s regions. Finance carabineros Minister Felipe Larraín stated that Chile’s government continues to follow a responsible and healthy fiscal policy, while anticipating the economy to grow 4–5% and record inflation at 3%. We estimate GDP to grow 4.9% in 2013, while inflation remains close to the target by year end. A 2013 fiscal surplus above 2.5% of GDP appears as a plausible figure, given Chile's very low public debt level—estimated at 8.8% of GDP—and the availability of sovereign wealth funds. The structural balance rule avoids pro-cyclicality of fiscal policy and sudden changes in fiscal expenditure. Such a policy
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