of employment. fortunately, under most economic circumstances, both objectives should be realizable. if prices are stable in the long term, employment should grow along something like a full - employment path. and, as with fiscal policy, if the long - term anchor is holding, the fed should have the added ability to respond to short - term fluctuations in employment by raising or lowering interest rates without exciting market fears about inflation or deflation. to earn this credibility the fed should behave in a systematic way - - generally lowering interest rates when employment rates are, or would otherwise be forecast to be, below the long - term sustainable rate ; and raising interest rates when employment rates are, or would otherwise be forecast to be, above the long - term sustainable rate. several practical modes of operation have been suggested or used to accomplish these ends. the most common is flexible inflation targeting ( fit ), a monetary regime now used successfully by about twenty countries around the world. under fit, the central bank or the government announces an inflation target and tries to hit it, not in the present quarter but over a one - or two - year period. the targeting regime is usually flexible to permit the bank to respond to unforeseen shocks. the most successful fit regimes are also symmetric, permitting or requiring expansionary responses to an inflation rate that is below the target. in the absence of symmetry, the fit regime has no way of dealing with either recession or deflation. a second embodiment of the flexible anchoring approach is the so - called taylor rule, named after john taylor. under the taylor rule, the central bank would try to establish a normal level of short - term interest rates but would raise rates as inflation threatens and lower them as unemployment threatens. in a wide variety of circumstances, a sensible monetary response to a demand shock would look much the same for an fit central bank as for a central bank following the taylor rule. one distinction is that the taylor rule does not require the central bank to announce a formal inflation target. but even this distinction may be more apparent than real if the central bank following a taylor rule actually follows a reasonably steady inflation policy. the fed, for example, does not follow fit and has never announced a formal inflation target. but it has told the world many times that of all the available measures, it regards the price index for core personal consumption expenditures as the most realistic indicator of actual inflation. the time series for this preferred indicator shows that, over the past seven years,

one with integrated services and management capabilities. especially since the return to the motherland, the local financial industry has experienced robust development along with strong gains in the domestic economy ; the active promotion of appropriate economic diversification and regional cooperation by the macao government. indeed, with the high degree of openness, macao ’ s economy and finance are susceptible to external shocks and volatilities of global financial markets. over the last twenty five years, macao ’ s financial sector in its development process experienced challenges one after another, for example, currency devaluation storms triggered by the change in floating exchange regime for the thai baht in 1997 ; global economic slowdown driven by tech - bubble burst in 2000 ; sars outbreak in neighbouring jurisdictions in 2003 ; and us - subprime - led global financial crisis which started in 2007. nevertheless, with the strong support and joint efforts of all parties, the financial industry has managed to overcome such difficulties as the local economy develops. as at the end of may this year, the npl and car ratios of the banking sector were 0. 1 % and 15. 5 % respectively ; profitability was at all - time high. meanwhile, in terms of premiums and operating results, the insurance sector has also made impressive achievements. bis central bankers ’ speeches apart from financial supervision, amcm has been vested with the responsibility to manage the foreign exchange reserves of macao. since the establishment of the fiscal reserve regime, amcm has been assigned by the relevant legislation the responsibility of fiscal reserve management. in managing the fiscal reserve and exchange reserves, amcm has observed relevant legal requirements while upholding safety and prudent management principles. furthermore, amcm has diversified asset allocation and optimized investment portfolios on a reasonable basis of balancing risks and capital preservation. it goes without saying that the effort and hard work of every department of amcm are indispensable. i would like to take this opportunity, on behalf of amcm, to express my candid appreciation for the dedication of all our colleagues, present or retired, including those who returned to portugal after their retirement. we are grateful to secretary tam for his guidance, support and trust. we would also like to thank the audit committee and the advisory council. as we celebrate the 25th anniversary of amcm this evening, it also marks the beginning of a new phase. i sincerely hope that in the coming years, all my colleagues at amcm will continue to cope with the increasingly complex environment