], the economy would slow down. the slow economy is due to the high cost of imports and, unluckily, the high cost of some local agricultural products, [ which ] has reduced money for discretionary spending. this, together with the policy rate increases, give us an even more chance of seeing below 4 percent inflation next year. our policy rates are not in response to the current inflation per se ; they are forward - looking because we take very seriously our inflationtargeting mandate. if inflation is high next year, this would not be due to external supply shocks anymore but due to second - order effects. we notice, for instance, that wages are rising and transport fare petitions. there's very little we can do about this. but absent other shocks, we expect inflation to be below 4 percent next year and closer to 3 percent than to 4 thereafter. my point is we did not take away growth [ with our tightening ]. what we did was create bigger growth opportunities next year and the next. the other way to look at it is : we might have lost a little bit of output this year, but if we had postponed our actions, we would have lost more in the following years because the pressure to raise rates would have been even greater if we had not acted on inflation this year. in tagalog, mas mabuti ang maaga kaysa magaling. don't see our moves as being anti - growth. we're actually laying the groundwork for better growth in the coming years. another point : our banks are in a good position to absorb losses : there's enough provisioning, and capitalization is quite high – much higher than what's required. not all non - financial corporates are healthy, but that's the very nature of capitalism. in any distribution of firms in any capitalist economy, some will be doing much better or worse 2 / 3 bis - central bankers'speeches than average, but on average, [ the banks are ] quite strong. in my experience with the monetary board, never were we told by the government that our policy rate was too high. never were we told by the government to be gentle to a bank. the independence of the central bank is well understood by authorities, most of all by the current secretary of finance. thank you. 3 / 3 bis - central bankers'speeches

economy. second, we all know also that any regulation may have unintended consequences. one of those, of course, is to create incentives for regulatory arbitrage. it is therefore crucial that the reforms be applied fully and consistently across jurisdictions. it is also important to make sure that a significant part of financial intermediation does not shift to the unregulated ( shadow ) financing sector, as this would not help reduce the likelihood of disruptive financial crises. finally, increasing robustness is a necessary but not sufficient condition to get safer financial systems. another important element is to ensure that risk remains at acceptable levels and carefully managed. this is, so to speak, one specificity of our approach in this country. we believe in strong and efficient supervision. we don ’ t think that bigger cushions are a substitute for competent supervisors. we are strong supporters, in our jargon, of the “ pillar 2 ” approach, whereby the supervisor is in charge, at any single moment, to check the adequacy of capital buffers with the effective level of risk in the system. needless to say, we also strongly support the development of macro prudential tools allowing authorities to detect and prevent systemic risks. given that all economic cycles are not simultaneous, to be fully efficient, those tools should be set and implemented at each jurisdiction ’ s level and not a regional one, in order to take into account national cycles and the level of risks of individual economies. overall, i can assure you we are very keen to monitor in real time the economic impact of financial regulation. for the first time, economic and systemic assessments have been made of the new projected basel 3 framework. we will continue to update them permanently. a good example of our constant vigilance relates to projected liquidity ratios, where the systemic impact and implications for monetary policies are being thoroughly reviewed at this time. * * * to conclude, let me emphasize that policy makers are fully aware of possible macro consequences of regulatory reforms and will be eager to limit the economic costs. beyond broad effects on growth, it is also clear that the new regulations should neither derail financial systems nor favor some particular business models over others. bis central bankers ’ speeches yet, there was, and still is, a need to move from a financial world of excessive risk taking and heavy regulatory arbitrage to a new system of better quality capital and increased risk capture. an implementation of the basel iii package endorsed by the g20 will provide the