heartened by your show of support. as the economist adam smith once said, and i quote : “ civilized society stands at all times in need of the cooperation and assistance of great multitudes. ” bis central bankers ’ speeches it is our hope therefore that the same spirit of cooperation and collaboration will characterize our pursuit of continuing reforms in 2013 and the years ahead. and now, let us offer a toast to all of us coming together for an even stronger, more responsive, more inclusive, and more successful philippine banking system that will underpin a strong and vibrant philippine economy that will bring prosperity and a better quality of life to our country and our people. cheers! bis central bankers ’ speeches

##ism. pragmatism 1 / 4 bis - central bankers'speeches in light of our limited knowledge about the economy and the influence of monetary policy, decision - makers are well advised to be pragmatic. they should choose policies that exhibit a certain degree of robustness to different circumstances. rather than seeking measures that are optimal in the context of specific situations, decision - makers are better off adopting less ambitious policies that produce reasonably good results in a sufficiently large variety of scenarios. in analysing such scenarios, we work with models that incorporate a relatively small set of key relationships. these relationships provide useful approximations of the economy's dynamics and the transmission of monetary policy. however, not everything can be captured in mathematical equations or measured with the available data. furthermore, our assumptions about the behaviour of market participants are drawn from the past, which is often only roughly comparable to a given situation in the present. policymakers must therefore also look beyond models and form broader – less formal – hypotheses about how the economy and the monetary transmission mechanism function. model simulations and forecasting must have a prominent place in our decision - making process – not least given the lag in monetary policy's impact on the economy. however, risk assessments and cost - benefit analyses should also involve judgements based on less precisely measurable evidence that cannot be directly incorporated into models. the snb takes such a pragmatic approach to decision - making. our policies do not follow a strict rule designed to be optimal with respect to a single model of the economy. our main inflation forecast is based on a suite of models, as well as judgmental adjustments drawing on a variety of outside information not captured in the models. such outside information includes monetary indicators and discussions with company managers. furthermore, our monetary policy decisions are not based exclusively on our inflation forecast. our forecast is always complemented by a careful risk assessment and comprehensive cost - benefit analysis by the governing board. the snb's pragmatic approach to decision - making allows us to respond quickly and flexibly to different kinds of shocks. however, it is important to note that pragmatism is not synonymous with unbounded discretion and a lack of discipline in policy - making. this brings me to the second principle : consistency. consistency while decision - making should be pragmatic, it should be consistent over time. policy decisions must be based on a firm commitment to the objective of price stability. they cannot be based on a period