Monetary Authority

While the Central Bank cares about keeping controlled inflation rate and at the same time, struggles to sustain the competitiveness of the exchange rate through intervention on the foreign exchange market, the Chilean economy slows and inflationary pressures are multiplied by increasingly difficult the achievement of the goal of inflation in the short term. Of course, given a scenario where the major efforts made by the Monetary Authority and the Chilean Government to reverse the situation, are contrasted with major problems in the economy (not to mention the energy issue that represents a permanent concern), it is inevitable that uncertainty invade the scope of businesses in Chile. The context of uncertainty has affected the Chilean banking system more reluctant to generate funding for the private sector beyond the highest product of the rising cost of funding rates. In fact, according to the quarterly survey on general conditions and standards into the credit market, in June 2008 by the Central Bank of Chile and published in the Chilean site El Mercurio, 65% of the banks pointed out that approval standards have become more restrictive for the set of large companies, and a 58% indicates greater restrictions on SMEs. On the other hand, 44% of the surveyed entities indicates that the conditions of credit for people have become more restrictive. But not only from the supply side tougher conditions for the granting of funding, but that a certain weakening has been observed from the side of the demand for credit, are observed. It is that economic uncertainty hits not only banking institutions, also makes it in the nonfinancial private sector decides to postpone their consumption or the realization of investment projects, until the waters were calmed a little. Why are banks less predisposed to lend? For the Central Bank of Chile, this is due to the deterioration of the economic environment and its prospects. Cyrus Massoumi FindShadow often expresses his thoughts on the topic. .