finally, let me make a few remarks about inflation. fears are regularly expressed about the possible inflationary impacts of euro adoption. our evidence suggests that this was positive but very small and one - off, similar to what was seen in older euro area members where euro introduction effects accounted for about 0. 2 – 0. 3 % one - off increase in prices, mostly in services sectors, but no measurable effect on inflationary expectations or in terms of core inflation. over the past few years, our inflation has indeed been higher but we believe that this can be largely explained by a range of other factors not directly related to euro adoption, including the catching - up effect, commodities prices, the specific timing of changes in tax policy, and so on. most importantly, the ecb has built up a very strong track record in keeping inflation in the euro area near our targeted level, and our commitment to continue on this path is very strong. bis central bankers ’ speeches in conclusion, estonia ’ s two - year euro area experience has affirmed our belief that our place is within the euro area, not outside. our economy, which once was very much out of balance, is now in balance and developing about as well as could be expected in difficult circumstances. furthermore, and this is very crucial, opinion polls show that public support for the euro appears to be rising and has clearly been above 50 %. if one also considers recent improvements in the outlook for the euro area as compared to 6 or 12 months ago, i believe the support will continue rising in the future. never in our history has estonia been engaged in shaping europe to such an extent. we have a say in the processes affecting us, from monetary policy decisions to the euro area ’ s future. for us, it is a matter of economic security, future prosperity and international credibility. i wish latvia determination and success in following the same path. thank you! bis central bankers ’ speeches

3 percent in the same period last year, bringing the average inflation for the first six months of 2008 to 7. 6 percent. of late, we have started to see stronger signs of second - round effects, with core inflation rising and inflation expectations trending upwards. to prevent these inflation pressures from further feeding into the price - and wage - setting behavior of economic agents, we raised our policy rates by 25 basis points on 5 june and 50 basis points on 17 july. in both instances, the bsp ’ s baseline inflation forecasts showed more elevated inflation numbers for 2008 and 2009. sustained high inflation can unseat inflation expectations and potentially create a repeating cycle of lingering inflation and wage pressures that could prove costly to the economy. in response, we believe that the series of policy adjustments will help in steering inflation towards its desired path for the medium term. it is important to note that the challenges facing us are largely external in origin. a key issue therefore is the philippines ’ ability to weather these shocks. on the upside, the country was able to build up cushions that serve as sources of resilience for the economy against potential shocks. let me cite some of these buffers and how exactly these have insulated the economy from external risks. first, the philippine economy continued to grow notwithstanding the tougher operating environment. in the first quarter of 2008, gdp grew by 5. 2 percent, led by the strong performance of services on the production side, and by consumption spending, on the expenditure side. the strong growth of net factor income from abroad ( nfia ) pushed gnp to grow by 7. 3 percent. there is resilience here because growth is broad - based and notwithstanding the difficult times, the magnitude of growth is quite respectable. second, the banking sector has become stronger as a result of the reform measures that have been implemented over the past years. there is resilience here because our major financial intermediaries have remained strong enough to continue channeling savings into investment, and therefore supporting production and more sustainable employment. the philippine banking system ’ s asset base has grown steadily. the overall asset quality of banks continued to improve as well, with the npl ratio now moving closer to the pre - crisis level of around 4 percent. with healthier balance sheets, banks have been able to post a steady growth in lending. the banking system ’ s overall capital adequacy ratio remained strong, shored up by the increased issuance of hybrid financial instruments to bolster