economists and central bankers also devoted great attention to understanding the causes and consequences of inflation, providing the intellectual underpinning to policies oriented toward price stability. in many countries, the factors i have discussed here led to changes in central banks that may make it more difficult to revert to high - inflation policies. the most notable change is the increased independence of many central banks and the correspondingly reduced control of the fiscal authorities over monetary policy. central bank independence reduces the ability of a government to " rob the piggy bank " through a surprise inflation tax. in most cases, central bank independence can be reversed by a majority vote of the national legislature. but having to resort to such a vote is a greater obstacle to inflationary finance than that posed by previous arrangements, especially given the public's increased sensitivity and aversion to inflation. central bank independence has typically been granted in conjunction with an explicit mandate that makes the achievement of low and stable inflation one of the goals of monetary policy. central bank independence, together with a mandate that includes price stability, increases the credibility of monetary policy. policy is credible because the central bank's objectives are clear to the public and because the central bank can be held accountable for failing to achieve its objectives. when citizens are more aware of the costs of inflation, and when governments are less able to reap benefits from high inflation and thus have less incentive to use the central bank as a piggy bank, institutional reforms that make central banks more credible and independent are more likely to be adopted and sustained. 13 the fundamental forces i have described today - globalization, deregulation, financial innovation, and public understanding about the costs of inflation - provided the impetus for fighting inflation and opened the political path to institutional reforms, such as central bank independence, that enhance central bank credibility. once in place, these reforms made further progress against inflation easier and raised the costs of backsliding. as the benefits of stable prices accrue and as financial markets deepen and become more sophisticated, the benefits of sound economic policies will help to create day. see morten bech and bart hobijn ( 2006 ), " technology diffusion within central banking : the case of real - time gross settlement, " federal reserve bank of new york, staff reports no. 260. http : / / www. bcb. gov. br /? paysysreform this hypothesis was raised in the discussion of rogoff ( 2003 ). see guillermo ortiz, chair, " general discussion

help ensure safety at the system level. in truth, some have said that at the height of the gfc, central banking was the “ only game in town ”. monetary policy was made to bear the brunt of the heavy lifting in responding to the effects of the crisis because there was very little fiscal policy space, particularly in the aes. you may ask, eight years from the gfc, how do we see the operating environment? what is the global outlook now? how does that translate to the philippines? with these in mind, let me structure the rest of my presentation as follows : since i began with the gfc, let me continue with our global outlook and the risks and challenges we see from global impulses. then i ’ ll move to our own domestic market dynamics, and conclude with the policy thrusts of the bsp to address these concerns. the consensus at the moment is that global growth will continue to be uneven. if you look at the slide closely, you could see, global growth is multi - speed. in the most recent forecast of the imf, the us was the only major economy for which the fund raised its growth projections. the growth forecasts for eu and japan, as well as for emerging and developing asia ( which includes india and china ) were downgraded. an offshoot of the growing relative strength of the us economy has been the parallel strength in the us dollar, based on the us dollar currency index as of 23 february 2015. further, due to this weak and uneven global economic growth, central banks are seen as adopting differing paths in their monetary policy stances. on one end of the spectrum, the fed reserve ( central bank of the us ) is widely expected to begin to raise its interest rates ( “ lift - off ” ) this year, while on the other end, the ecb has announced its own version of quantitative easing last month and japan had earlier further increased its monetary base. the upshot of this divergence is that one end of the spectrum provides a counterbalance to the other, giving the market the confidence that global liquidity will not just dry up with policy normalization in the us. however, some market participants have recently begun to reassess the strength of the divergence among central bank policies, with the steep drop in oil prices. the drop in oil prices has : 1 ) heightened deflation pressures in the eu and japan, 2 ) led to reduction in capital expenditures in the us that now threatens to