amando m tetangco, jr : 15th anniversary of the central bank of the philippines remarks by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the bsp 15th anniversary, manila, 3 july 2008. * * * magandang umaga sa inyong lahat! fellow central bankers, on behalf of the monetary board, i greet all of you a happy 15th anniversary! by any measure, this is a milestone we should celebrate and be proud of. why do i say this? well, you and i know that the first 15 years of the bangko sentral ng pilipinas has been fraught with challenges. as an institution starting afresh, we had to reorganize and align our policies in accordance with the clear mandate given to the bangko sentral : to stabilize prices and ensure a sound banking system. soon after, we had to contend with the fallout from the asian financial crisis, political upheavals, natural calamities, and the threats, as well as opportunities, that globalization brings. nevertheless, we always pulled through and emerged the better for it. in the process, we have been able to provide stability to the economy and the country through responsive monetary and banking policies. for this we thank all of you – ladies and gentlemen of the bangko sentral ng pilipinas. let us therefore give ourselves a well - deserved round of applause. once again, let us acknowledge the contributions of former mb members dr. vicente valdepenas, jr. and atty. raul boncan by giving them a big hand. let ’ s also give a round of applause for our present mb members : secretary romulo neri ; former finance secretary juanita amatong ; atty. nelly favis - villafuerte ; mr. alfredo antonio ; and our brand - new mb member atty. ignacio bunye. palakpakan din po natin ang dalawang na - unang gobernor ng bangko sentral ng pilipinas : si governor gabriel singon at si governor rafael buenaventura! ladies and gentlemen. the collective efforts of central bankers, past and present, have generated recognition for governor singson, governor buenaventura and myself and most of all, for our beloved institution – the bangko sentral ng pilipinas. these are well - deserved recognition that we should be

in interest rates, it may be possible to move rates very quickly in response to an important piece of information. but when you are highly uncertain about how to interpret events, it pays to be more cautious and gradual in your approach. to use an analogy with driving — you should slow down in a fog. it follows from this that the " right " amount of movement in interest rates depends very much on the circumstances. sometimes rates will be highly variable, as they were in the 1980s, and sometimes they will be quite stable, as they have been in the most recent decade. in all of this, interest rate stability should be seen not as a goal in itself, but as a by - product of a stable macro - economic environment. let me turn now to the second of my three questions. question 2 : why not leave interest rates to the market? this question, again, is based on a plausible - sounding premise, but the proponents of this view are often rather unclear about what " leaving it to the market " would really mean in an operational sense. it might mean several things. one possible meaning, that will not be discussed here, is that open market operations should be directed actively to controlling growth of the money base and thereby letting interest rates be determined as a residual. since this suggestion involves active intervention by the central bank, it is hardly in keeping with a " leave it to the market " approach. for those in its simplest form, leaving interest rates to the market would mean simply telling the reserve bank to cease all open market operations. it is worth exploring what would be the consequences of such a policy. in a world where the reserve bank was undertaking no open market operations, the amount of cash that underpins the money market ( exchange settlement funds, or what the academics call " highpowered money " ) would depend on the government ’ s fiscal balance, and it is not hard to see that this would be likely to result in monetary instability. any government deficits not financed by an exactly coincident issue of debt to the public, for example, would mean a rise in cash and a fall in interest rates. similarly, a surplus not exactly matched by debt retirement would lead to a shrinkage of the amount of cash and an escalation of interest rates. in both cases, there would be much more short - run volatility in interest rates than exists at present. this is because the day - to - day fluctuations in the government ’ s position, which can be quite