amando m tetangco, jr : bangko sentral ng pilipinas ’ stakeholders ’ awards – a celebration of solid partnership speech by mr amando m tetangco, jr, governor of bangko sentral ng pilipinas ( the central bank of the philippines ), at the 2013 awards ceremony and appreciation lunch for bsp stakeholders, manila, 16 july 2013. * * * magandang umaga sa inyong lahat! on behalf of my colleagues at the monetary board and the bangko sentral ng pilipinas, i thank all of you for accepting our invitation today to our stakeholders awards ceremony and appreciation lunch for bsp stakeholders. as in years past, this ceremony takes place during the bangko sentral ’ s anniversary month. this year however, is more special : this month – july 3 to be exact – we commemorated the 20th anniversary of the bangko sentral ng pilipinas. and today, we mark the 10th year of our stakeholders awards, the annual celebration of our fruitful partnership and collaboration. ladies and gentlemen. in observing these milestones, we take the opportunity to express our deep appreciation to all our guests in this hall and to our other stakeholders across the country for helping us craft policies and implement programs that make lives better for our people. among others, the continuous improvement in the quality of our surveys provides a good anchor for the monetary policies of the bangko sentral ng pilipinas, the main objective of which is to keep prices low and stable. with your support, we continue to be successful in this effort. we have tamed inflation at low single digit levels – 2. 8 % as of june 2013, with year - to - date inflation at 2. 9 percent. one of the monetary tools used by the bangko sentral to influence inflation is its policy rates, the benchmark used by banks to transact with their own customers. under the bangko sentral ’ s inflation targeting framework, policy rates are adjusted appropriately and pre - emptively to ward off inflation threats. in general, it takes policy rate decisions from 18 to 24 months to work their way through the economy. thus, the bsp ’ s monetary board ensures that its policy rate settings are based on accurate informationintensive studies such as business and consumer outlook. this includes the quarterly business expectations survey which covers the top 7, 000 corporations in the country and the quarterly consumer expectations survey which covers 5, 000 households. we are

the current hiking cycle, the first leg of monetary policy transmission – to financing conditions – has been very strong. compared with previous hiking cycles, firms'lending rates have increased at a faster pace and credit volumes have weakened more markedly. transmission to the bank lending channel is likely to continue unfolding as lenders may become more prudent in light of rising funding costs and a slowing economy. moreover, interest rates on outstanding debt will continue to increase as loans are progressively repriced. all in all, in my view, the transmission of our policy tightening to financing conditions seems to be well underway. the second leg of transmission relates to the way in which changes in financing conditions will affect economic activity, as firms and households adjust their plans for consumption, investment and savings accordingly. the transmission of monetary policy tightening to the real economy is proceeding at a slower pace, with a substantial share of the transmission still in the pipeline. for example, real estate activity has slowed down amid the weakening of property valuations. for the economy as a whole, modelbased estimates continue to suggest that, owing to the typical lags in monetary transmission, the bulk of the impact of our tightening is expected to materialise only in 2 / 4 bis - central bankers'speeches the course of this year and thereafter. 1 the downward impact of our tightening so far on gdp and inflation is estimated to average around 2 percentage points over the 2023 - 25 period, with the strongest effect expected on gdp growth this year and on inflation over the next two years. it is also worth noting that the speed of transmission varies across the euro area. in particular, the transmission to households is likely to be faster in countries where variable rate mortgages predominate over mortgages at fixed rate. at the same time, uncertainties regarding transmission remain, mainly in relation to two sources. first, the current hiking cycle is unprecedented in speed. moreover, it follows a long period of accommodative monetary policy and was accompanied by the recalibration of balance sheet policies, all of which limits comparability with historical regularities. second, the tightening of our policy stance occurred in reaction to an unprecedented constellation of shocks hitting the euro area over the last three years, which had a disruptive effect on economic conditions and the inflation environment. the fact that we are still confronted with the overlapping legacy effects of these shocks may imply that monetary policy transmission is proceeding differently this time around compared with what historical regularities might suggest. the