0. 2 percent and 0. 1 percent over the remaining quarters of the year. core pce inflation jumped to a monthly average of 0. 4 percent in the first quarter of this year but is now estimated to be back to 0. 2 percent last quarter. most importantly, i don't have to look at the second decimal place to see progress! the recent data are making me more confident we will achieve the inflation goal of our dual mandate. monetary policy now let me turn to the implications of this data for monetary policy. as i noted earlier, the changes in the data this year have made it hard to formulate an outlook for policy that would apply to the range of possible paths the economy may take. that range of possibilities must consider two risks. on the one hand, it is essential that monetary policy get inflation down to a sustained level of 2 percent. if we start to loosen policy too soon, and allow inflation to flare up again, we risk losing credibility with the public and allowing expectations of future inflation to become unanchored. that credibility has helped inflation fall as quickly as it has in the past 18 months and squandering it would be a grave mistake. monthly pce inflation has very recently been running near 2 percent at an annual rate, but i need to see a bit more evidence that this will be sustained. the other risk is that we wait too long to ease monetary policy and contribute to a significant economic slowdown or a recession, with unemployment rising notably. 4 / 6 bis - central bankers'speeches with those two risks in mind, let me lay out three scenarios for the economy this year that would result in leading me to different views about appropriate policy. one assumption i make is that there is no significant deterioration in the labor market in the next several months - that we are able to keep the labor market in its current sweet spot. while i believe this is likely, i will be paying close attention to the employment side of our mandate. the first scenario is the optimistic one. here we continue to receive more very favorable cpi inflation reports, with implications for very favorable pce inflation readings as well. this would give us a nice run of inflation data starting in may. i see a significant but not high probability of this scenario occurring. and, in that circumstance, i would have much greater confidence in inflation moving sustainably toward 2 percent. in this scenario, i could envision a rate cut in the not - too - distant future. the second

within the bangko sentral's forecast range of between 5 to 5. 7 %. as the institution mandated to stabilize prices, the bangko sentral is satisfied with this trend. essentially, the continued softening of fuel prices and the strengthening of the peso supported the further deceleration in inflation in october. latest forecasts of the bangko sentral continues to indicate a generally declining path for inflation, with average inflation for 2007 expected to fall within the 4 - 5 percent target, barring unforeseen adverse shocks of course. as a result, the monetary board, in its last policy meeting on november 2, kept the bangko sentral's benchmark policy rates unchanged, but reinstated a tiering of interest rates on bank placements with the bsp to encourage further bank lending. treasury bill ( t - bill ) rates also declined across the board in early november, due primarily to the improved fiscal position of the national government, manageable outlook for inflation and ample liquidity. on the external front, the overall balance of payments position for the first six months of 2006 recorded a surplus of $ 2. 04 billion, an improvement from the us $ 1. 98 billion surplus recorded in the same period in 2005. the improvement resulted from higher inflows in current transfers, particularly from remittances of overseas filipino workers ( ofws ), higher exports and investment inflows. during the first nine months this year, ofw remittances reached us $ 9. 1 billion, up 14. 4 percent from the same period last year as more filipinos found work overseas and banks became more aggressive in offering remittance services to ofws. based on this trend, we expect total ofw remittances in 2006 to set a new record and approximate $ 12 billion. i am also pleased to inform you that our country's gross international reserves ( gir ) reached a new record - high level of us $ 22. 3 billion in october this year. given the sustained uptrend in our international reserves, we have in fact pre - paid some of our foreign loans. likewise, these developments on the external front continue to sustain the appreciation of the peso versus the us dollar. i am sure you are all aware that the peso hit p49. 60 to one us dollar yesterday, its highest level since 2002, as market sentiment continues to be positive. better - than - expected fiscal performance is a key factor in this