eli m remolona : emerging trends in central bank policies and operations speech by mr eli m remolona, jr, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the 4th international research fair, manila, 30 july 2024. * * * introduction that was a very thought - provoking presentation, refet [ gurkaynak ]. refet is an old friend from the fed ( federal reserve ). but my role now is to welcome you all, to do a proper welcome for you all. so, professor refet gurkaynak, presenters, discussants, and participants - from both the philippines and abroad - and bsp ( bangko sentral ng pilipinas ) colleagues, including my colleagues in the monetary board, good afternoon and thank you for joining us over the next two days. this is the fourth annual bangko sentral ng pilipinas international research fair. the fair started in 2021 and it has become one of my favorite events. so, thank you former governor ben diokno, who gave the opening remarks today. thank you, former governor felipe medalla, and thank you to the bsp research academy ( brac ) for all that you have done to set up this fair and to sustain it. as we all know, central banking is a nerdy business. that means research is central to what we do. this reminds me of an episode in douglas adams'wonderful novel, a hitchhiker's guide to the galaxy. in the novel, a supercomputer called deep thought was asked the question, " what is the answer to life? " after extensive computation, deep thought replied that the answer to life is the number 42. when doubts were raised about the strange answer, deep thought replied, " that is definitely the answer. i think the problem is that you have never actually known what the right question is. " right questions indeed, research is largely about asking the right questions. often the answer to the right questions would need good data. about data, the mathematician and physicist henri poincare has said, " science is built up with facts, as a house is with stones ; but a collection of facts is no more a science than a heap of stones is a house. " as the world changes, our questions change, our data change, and our analyses change. when i look at the program for today and tomorrow,

about is inflation. in other words, all of these are working to relax the speed of the importation process. the president is already on this. that is why i am quite confident that we will be back to normal inflation next year. no tradeoffs between price and financial stability 1 / 2 bis - central bankers'speeches the other reason that this is the case is that we [ at the central bank ] essentially prevented knock - on effects from supply shocks because we were aggressive. we increased the policy rate from 200 basis points ( bps ) to 625 bps in just nine months. we were able to do that because we knew that bank balance sheets could take it [ the impact of the rate hikes ]. with high policy rates - while they [ the banks ] could have [ incur ] losses on their holdings of government securities - but with the higher interest rates, they earn more money. on the whole, because the banks have very strong balance sheets, financial stability was never a constraint in our use of the policy rate to quell inflation. on the narrowing interest rate differential and the weakening exchange rate the other reason we did that [ raise the policy rate ] is, as the us [ united states ] increased its policy rate, its policy rate became very close to ours. if you asked people a hypothetical question, " if the interest rate on the peso instrument is the same as the interest rate on a dollar instrument, which instrument would you choose? " even filipinos would choose the dollar because of all the advantages of the king dollar. that is the other reason. the differential between our policy rate and the us policy rate, if it narrowed too much, could cause a very large fall in the peso. however, this [ depreciation ] is also partly reflecting fundamentals since the current account deficit increased, and the deprecation of the peso last year was clearly not good for trade numbers. as foreign exchange pressures wane, the central bank can dedicate full resources and focus on fighting inflation it [ the depreciation ] was due to the differential and the fact that people look at the exchange rate and say, " all the corporations that borrow abroad wanted to buy their dollar needs for debt servicing. " so, the moment we give [ delivered ] the 425 bps [ in cumulative ] policy rate increase, the peso appreciated. after a long series of policy rate adjustments, year - to - date [ from 1 january to 4 april 2023 ]