purchasing power of the poor, which is important as the poor are vulnerable without adequate assets to hedge against high inflation. also, the country ’ s strong economic fundamentals indicated ( among others ) by stable inflation, results in positive differentiation by global investors encouraging investments into the country. in 2002, the bsp adopted the inflation targeting ( it ) framework for monetary policy. the framework requires monetary policy decisions to be forward looking. it considers the widest set of available and relevant information about the economy. it promotes transparency through announcement of targets and the reporting of measures that the bsp will adopt to attain these targets, as well as the reasons for and outcomes of its policy decisions, increasing accountability on the part of the bsp. in 2016, the bsp adopted the interest rate corridor ( irc ) system to further enhance monetary 1 / 4 bis central bankers'speeches policy effectiveness. the irc system guides short - term market rates towards the bsp policy interest rate, enhancing the link between the bsp ’ s monetary policy stance and financial markets. this impacts the real economy. for six consecutive years from 2009 – 2014, the inflation target has been met. during episodes when inflation was above or below target, there were external or supply - side developments beyond the ambit of monetary policy. as an inflation - targeting central bank, we are guided by data - dependent and forward - looking assessment. this disciplined and structured approach means that we refrain from reacting to short - term fluctuations or commentaries. our focus is obtaining comprehensive information and making decisions based on inflation forecasts over a given policy horizon. further, the bsp follows the standard approach of not reacting to supply shock episodes as these tend to be transitory or short - lived in nature, but monitor conditions for signs of second - round effects. this was the case early this year when data indicate the inflation environment was driven by supply - side factors and our forecast continued to show inflation upticks as transitory and moderating within the target in 2019. thus, adjustment in policy rate was not yet warranted. starting in q2 2018, however, we note that forecasts have shifted higher over the policy horizon. upside risks also continue to dominate the inflation outlook. meanwhile, inflation expectations remain elevated. we also recognize that sustained pressures on the peso could adversely affect inflation expectations. therefore, in response to dynamic economic and market conditions, the monetary board raised the policy interest rate by 25 basis points each in may and june 2018 and by 50

##s will lend support to our flexible peso. our solid macroeconomic fundamentals and growth prospects are attested to by continued favorable investor sentiment. foreign direct investments ( fdi ) continue to grow. sovereign credit ratings remain favorable. in particular, fdi - to - gdp ratio improved from 1. 6 percent in 2005 to 3. 2 percent in 2017. for the first five months of 2018, fdi registered growth of 49. 0 percent from the comparable period in 2017. notwithstanding global and domestic challenges, the philippine economy has cemented its resilience and has built buffers over the years. financial stability : what it means as mentioned earlier, the public is aware that the bsp is supervisor and regulator of banks. the limited notion though is that we exist merely to regulate, to police … of course, sound rules and regulations implemented by the bsp are expected to be followed to protect the public interest. but more than this, our regulations and policies exist for a higher purpose. the idea is that a well - functioning financial system supports productive expansionary business activities and consumption spending, hence, is crucial to promoting economic growth. our pursuit of banking and financial reforms in the areas of supervisory policy, banking supervision, financial surveillance and systemic risk, stabilizes and strengthens the domestic financial system and helps grow financial institutions into regionally competitive and economically viable players. the bsp ’ s role is to ensure that the financial system is able to perform its financial intermediation role despite economic shocks. likewise, we are cognizant that financial stability is essential for monetary policy to be effective since the fragility of the financial sector can affect the transmission of monetary policy to the real economy. because of long - term structural reforms, the philippine financial system, with the banking sector at its core, continues to be a source of strength and stability for our economy. as of end - june 2018, the asset base of the banking industry reached over php 15. 7 trillion, higher by 10. 3 percent a year ago. asset quality remains satisfactory. there is also continuing build - up in capitalization. the risk - based capital adequacy ratio ( car ) of u / kbs as of end - march 2018 stood at 14. 48 percent on a solo basis and 15. 07 percent on a consolidated basis. we also ensure that appropriate financial products and services are accessible to a greater majority. our regulatory framework recognizes that there are the deeply ingrained barriers to financial access such as cost