Central Bank of Chile and Global Interdependence Center

0Past Performance Is Not Necessarily Indicative Of Future Results.

Is Monetary Policy Causing

Commodity Inflation?

Monetary Policy and Central Banking in the Post Crisis Environment

Santiago, Chile

Jan 17, 2011

US M2 vs CHINA M2

1Past Performance Is Not Necessarily Indicative Of Future Results.

10%

14%

18%

22%

26%

30%

1%

3%

5%

7%

9%

11%

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10

US M2 CHINA M2Nov 2010Sources: US Federal Reserve and The People’s Bank of China

CHINA YUAN IN US DOLLARS

2Past Performance Is Not Necessarily Indicative Of Future Results.

0.12

0.13

0.13

0.14

0.14

0.15

0.15

0.16

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

Dec 2010Source: Bloomberg BGN

TOTAL PCE DEFLATOR VS CORE PCE DEFLATOR

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

3Past Performance Is Not Necessarily Indicative Of Future Results.

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Jan-83 Jan-87 Jan-91 Jan-95 Jan-99 Jan-03 Jan-07 Jan-11

TOTAL CORENov-10Source: Bureau of Economic Analysis

FOOD CPI VS ENERGY CPI

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

4Past Performance Is Not Necessarily Indicative Of Future Results.

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Jan-82 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10

ENERGY FOOD Nov-10Source: Bureau of Labor Statistics

TOTAL PCE DEFLATOR - CORE PCE DEFLATOR

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

5Past Performance Is Not Necessarily Indicative Of Future Results.

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Jan-83 Jan-87 Jan-91 Jan-95 Jan-99 Jan-03 Jan-07 Jan-11

Nov-10Source: Bureau of Economic Analysis

GDP DEFLATOR VS CORE PCE DEFLATOR

CURR QUARTER %CH FROM YEAR AGO

6Past Performance Is Not Necessarily Indicative Of Future Results.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10

GDP DEFLATOR CORE PCE DEFLATOR Q3 2010Source: Bureau of Economic Analysis

CRUDE OIL IN US$

Dollars per barrel

7Past Performance Is Not Necessarily Indicative Of Future Results.

20

40

60

80

100

120

140

160

1/6/2006 1/6/2007 1/6/2008 1/6/2009 1/6/2010

Dec-31-2010Source: Bloomberg

CORE CPI MEASURES

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

8Past Performance Is Not Necessarily Indicative Of Future Results.

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

CORE SERVICES CPI CORE CPI COMMODITIESSource: Bureau of Labor Statistics Nov-2010

US SINGLE FAMILY HOUSING STARTS VS US CAR SALES

MONTHLY, MILLIONS OF UNITS

9Past Performance Is Not Necessarily Indicative Of Future Results.

8

10

12

14

16

18

20

22

0.3

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10

US Single Family Housing Starts US Car SalesNov-2010

Sources: US Census Bureau and Bureau of Economic Analysis

CORN IN US$

Dollars per bushel

10Past Performance Is Not Necessarily Indicative Of Future Results.

1.5

2.5

3.5

4.5

5.5

6.5

7.5

1/6/2006 1/6/2007 1/6/2008 1/6/2009 1/6/2010

Dec-31-2010Source: United Stated Department of Agriculture

GLOBAL GRAIN STOCKS: DAYS OF CONSUMPTION

11Past Performance Is Not Necessarily Indicative Of Future Results.

0

20

40

60

80

100

120

140

COARSE GRAINS WHEAT RICESources; Historical Data: USDA

10/11 Projection: McVean Trading & Investments

US PRODUCTION OF TOTAL RENEWABLE FUEL

Billions of Gallons

12Past Performance Is Not Necessarily Indicative Of Future Results.

3.00

8.00

13.00

18.00

23.00

28.00

33.00

38.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Actual through: 2010

Forecast through: 2022Source: US Department of Energy

CHINESE GDP

CURRENT QUARTER %CH FROM YEAR AGO

13Past Performance Is Not Necessarily Indicative Of Future Results.

0

5

10

15

20

25

30

Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10

REAL GDP NOMINAL GDP IN YUANSource: National Bureau of Statistics of China Q3 2010

CHINA TOTAL BANK LOANS VS CHINA M2

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

14Past Performance Is Not Necessarily Indicative Of Future Results.

0%

5%

10%

15%

20%

25%

30%

35%

1/1/2000 1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010

BANK LOANS M2 Nov 2010Sources: China Economic Information Network and The People’s Bank of China

CHINA EXPORTS VS IMPORTS

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

15Past Performance Is Not Necessarily Indicative Of Future Results.

-40%

-20%

0%

20%

40%

60%

80%

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

EXPORTS IMPORTS Dec-10Source: China Statistics Monthly

CHINA RAILROAD FREIGHT VS ELECTRICITY PRODUCION

3 MONTH AVERAGE %CH FROM 3 MONTH AVERAGE YEAR AGO

16Past Performance Is Not Necessarily Indicative Of Future Results.

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

1/1/2000 1/1/2002 1/1/2004 1/1/2006 1/1/2008 1/1/2010

RAIL ELECTRICITY PRODUCTIONOct 2010

Sources: China Economic Information Network

COPPER IN US$

Dollars per metric ton

17Past Performance Is Not Necessarily Indicative Of Future Results.

2000

3000

4000

5000

6000

7000

8000

9000

10000

1/6/2006 1/6/2007 1/6/2008 1/6/2009 1/6/2010

Dec-31-2010Source: London Metal Exchange

COTTON IN US$

Dollars per Pound

18Past Performance Is Not Necessarily Indicative Of Future Results.

40

60

80

100

120

140

160

1/6/2006 1/6/2007 1/6/2008 1/6/2009 1/6/2010

Dec-31-2010Source: United Stated Department of Agriculture

GOLD IN US$

Dollars per ounce

19Past Performance Is Not Necessarily Indicative Of Future Results.

400

600

800

1000

1200

1400

1600

1/6/2006 1/6/2007 1/6/2008 1/6/2009 1/6/2010

Dec-31-2010Source: Bloomberg BGN