is especially the case when postponing tightening means lost credibility. to [ re ] gain credibility, you have to show action later, and that will cost you dearly, as we're beginning to see in the us. they [ the fed ] have to be more aggressive now. that is essentially the way the bsp had behaved even before i joined. however, when the pandemic came, we became " unconventional " : we cut the policy rate to 2 percent. for a central bank whose target is 2 - 4 percent, that really means if you hit the midpoint of the target, that is a - 1 percent policy rate. in addition, markets were panicking, fleeing to cash, and people were selling bonds. in an area where secondary markets were not as developed as the united states, and you were seeing higher bond prices as people were fleeing to cash, we knew that was a wrong behavior of the market because the pandemic is supposed to reduce capex. on 1 / 3 bis - central bankers'speeches the other hand, it will make people want to save more. the correct direction of interest rates was to fall from a fundamental standpoint, but it was actually rising. which was why we started buying bonds in the secondary markets. that, together with the special assistance we gave to the government, p600 billion [ in provisional advances ], was a p1. 6 trillion increase in our balance sheet. it was around p4. 5 trillion [ in total ]. but from the very beginning, we had an exit plan. from our [ initial ] plan, as we recovered from the pandemic, we would gradually raise interest rates back to the normal levels. but, as they say, " the plans of mice and men often go awry. " in this case, it was what happened in the us : us monetary policy becoming so aggressive and, of course, the very large increase in our import prices. our own calculation showed that only one - third of the increase in our current account deficit was due to economic growth ; the remaining two - thirds was due to high oil and non - oil prices. therefore, it was very clear that we had to exit sooner and faster than planned. initially, we were making a gradual exit : 25 [ bps in may ], 25 [ bps in june ]. then, we saw inflation was getting worse ; we raised the policy rate by 75 bps in a [ july ]

that causes me to be optimistic is that the policy rate is still below its prepandemic level. there is still some room to rise. nevertheless, we do admit that there may be some loss in output in the near - term. but if we take a longer view, there is very little loss of output. if you postpone fighting inflation, you're going to lose output sooner or later. better to lose it now when inflation is still relatively easy [ to control ]. our own forecast is that this year, average inflation will be way above our 2 - 4 percent target. next year, without factoring in the effects of our policy rate, the midpoint of our forecast for next year is 4 percent. but because of the recent actions that we have taken, i think it's now below 4 percent, better than a 50 / 50 bet that we will meet our target. that is the way it looks. our forecast for 2024 is very, very close to the midpoint of our target. now, of course, the future is very hard to predict, but if we look at our track record, there are very, very few occasions where we were above our target for more than two years in a row. equally, there are periods where we were below targets ; i remember 2015 - 2016. we do miss the target every now and then, but a great part of the reason why we miss our targets are global and domestic supply shocks, about which monetary policy is not very effective in the short run. i look forward to a comprehensive and constructive discussion with all of you, especially on the things in the central bank's toolkit. thank you. 3 / 3 bis - central bankers'speeches