international trade, especially with the accession of china in the world trade organization ; technological innovation ; trade and financial market integration ; demographic transition ; structural reforms in labor and product markets that led to greater competition and lesser price rigidities ; and more resilient policy frameworks in some emerging market and developing economies — particularly the successful adoption of inflation targeting as well as the more effective and transparent exchange rate, and monetary and fiscal policy frameworks ( world bank, 2019 ). 3 for central bankers, understanding inflation dynamics in relation to other economic variables is crucial. most, if not all, central bankers will agree with me that controlling infla¬tion is a demanding task. yes, the central bank can influence inflation by tightening and easing monetary policy. 1 / 3 bis central bankers'speeches however, the transmission process involves long and variable lags and a degree of uncertainty amid the continuously evolving structure of an economy. add to this is the increasing influence of global and regional factors on domestic inflation. amid these challenges, central banks need to adopt a robust communication strategy to effectively anchor inflation expectations. case in point, the philippines ’ headline inflation decelerated from an average of 15. 1 percent in the 1980s to 9. 7 percent in the 1990s. this slowed further to 3. 8 percent from 2002 to 2018, when the country adopted the inflation targeting framework. the implementation of the inflation targeting framework in the last 16 years has enabled the bsp to manage and keep inflation within manageable bounds. this provided support to greater economic activity, despite international and domestic shocks. moreover, the improved transparency, greater accountability and more effective communication, resulting from the implementation of inflation targeting, have enhanced the bsp ’ s credibility. this led to the continued anchoring of market inflation expectations to monetary policy decisions. however, in the first few years after the global crisis, the bsp experienced pressure in its monetary operations as short - term market interest rates diverged from the bsp ’ s policy rate. this was mainly due to strong capital inflows arising from the highly accommodative monetary policies, the extraordinary liquidity support of central banks in advanced economies, the steady stream of remittances from overseas filipinos, and revenues from business process outsourcing ( bpo ). to address this divergence, the bsp launched the interest rate corridor ( irc ) system in june 2016 to enhance the transmission of monetary policy by guiding money market interest rates towards our policy rate. to date,

and economic sectors, the government launched its 4 - pillar socio - economic strategy. the first two pillars deal with the urgent needs of the vulnerable sectors and the medical industry, while the second two pillars provide the enabling environment to support the funding needs for emergent initiatives and economic recovery. at the same time, the bsp launched its sustainable finance framework, an enabling regulation anchored on the bsp ’ s risk - based approach to supervision that mainstreams sustainability principles, and includes environmental, social and governance considerations in the governance framework, risk management system, strategies, and operations of banks. it also follows the united nations environment program ’ s ( unep ) schematic diagram of sustainable development. the issuance of the framework is timely as the impact of the pandemic covers a broad range of environmental, social and governance issues that are rightly high on the country ’ s sustainable 1 / 3 bis central bankers'speeches development goals. most of the problems highlighted are socio - economic issues such as poverty due to income loss, lack of access to food and nutrition, and unemployment. as we look closer, we see that the issues prioritized in the 4 - pillar strategy intersect with the areas covered in the sustainable development goals. this is a sign that the path to recovery from the pandemic is consistent with efforts towards building a green and sustainable economy. for banks, it means that it must refocus its strategy towards sectors and activities that support sustainable recovery. by harmonizing sustainability with recovery efforts, banks can seize various opportunities. first, banks can step up its social and sustainability bonds issuance. the health crisis put an enormous brunt on the country ’ s health, educational, food security and micro, small, and medium enterprises ( msmes ). channeling funds to support these sectors can help boost the country ’ s response to the pandemic and fast - track our recovery. in other jurisdictions, international banks like the nordic investment bank issued a “ response bond, ” and european investment banks issued a sustainability awareness bond, which both aim to alleviate the social consequences of covid - 19 by financing healthcare systems and labor market solutions. the philippines is poised to do the same with the “ guidelines on the issuance of social bonds under the asean social bond standards ” released by the securities and exchange commission ( sec ) in 2019. on june 17, the country welcomed the first issuance to use the asean social bond label. sec approved the bank of the philippine islands ( bpi