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

##p ’ s cornerstones in stakeholder engagement for financial inclusion. the citi microentrepreneurship awards ( cma ), as the fruit of such remarkable partnership, serves as an important platform to convey the message that collaboration with a strong shared vision, coupled with responsive policies and platforms, can bring the best out of the filipino people. it is thus with great interest that i participate in this year ’ s cma. i look forward to the opportunity to discover promising micro - entrepreneurs whose experiences, achievements, and community contributions would serve as an inspiration to everyone. to my fellow nsc members, we indeed have some exciting work ahead of us. may the cma continue to nurture and empower filipino micro - entrepreneurs in the years to come. again, good afternoon and thank you all for coming. 2 / 2 bis central bankers'speeches