mean to the bsp in terms of our organization. sustaining the shift in monetary policy regime the first pillar of price stability represents our contract with the filipino people. when consumer prices are stable, we serve the cause of economic growth. today, the issue of inflation strikes even closer to the hearts, or perhaps the guts of the public. surveys by independent research organizations have, for example, consistently ranked high prices as the foremost concern of the lower income classes. a low and stable inflation preserves the purchasing power of the people ’ s incomes. there is more food on the table and more services to buy. in my earlier interviews with the media, i have stressed one important point that will be the hallmark of my stewardship. we will not try to reinvent the wheel. instead, we shall strive to continually improve it and keep it running more efficiently. our vision is to see that it brings us to where we want to go. we shall therefore continue to adhere to inflation targeting as our monetary framework. inflation targeting emerged at that point where monetary targeting started to fade. since the implementation of inflation targeting in january 2002, we have seen how rigorous economic 1 / 4 analysis, discipline in the conduct of monetary policy and greater transparency in the thinking of the monetary authorities have contributed to reduced gyrations in consumer prices. the dynamics of inflation expectations has been largely anchored in the market ’ s appreciation of the bsp ’ s explanation of the factors driving inflation and what the bsp intends to do to address them. this is the face of continuity. but you will agree with me that perhaps there is scope for change. we shall soup up the inflation targeting framework. we will not only reassess the various components of our forecasting models and the integrity of our databases, but we will also intensify our capacity to anticipate possible shocks in the system. the first is to make sure we have the right tools to deal with shocks ; the second will give us the comfort that we will not be ossified by surprises. we have completed our early warning systems for various areas like currency, business cycles and the banking system, and we shall increasingly make use of them in our monthly review of the monetary policy stance. the results of our periodic environmental scanning exercises will be used in an attempt to more effectively incorporate political factors in assessing the risks to the inflation outlook. we are also reviewing our monetary tools that include the reserve requirement, open market operations and credit policy. if we may add, finally,

has always looked after our welfare. we see this in the better facilities, comprehensive adjustment in pay scale and expanded opportunities through improved training programs and scholarships. these are elements that we should review from time to time to ensure they remain adequate and appropriate. as a great inventor once said : “ … if we did all the things we are capable of doing, we would literally astonish ourselves. ” 2 meyer, laurence h. ( 2002 ) “ a term at the fed, an insider ’ s view, ” harper business. thomas alba edison. 3 / 4 the way forward the bsp story of the last six years is ending today with a considerable amount of success. we are moving into the story of the next six years, complete with the template of new ideas and bold reforms. if we are to chart the roadmap in a “ t ” account, we will see that along the way, there are pluses and minuses, opportunities and challenges. the success of the last six years is punctuated by some unfinished agenda that needs to be pursued to achieve continuity in a period where change is the only constant. i recall what that celebrated columnist of the new york times once suggested : it looks like some central banks find themselves with much less ability to move the economy than anyone expected. 3 the reason is that some of them somehow cultivated the mystique of their invincibility that now turns out to be a handicap. in our case, while we deliver bold strokes to the market, we shall not throw caution to the wind. we shall be fully accountable for our efforts to keep prices stable and the banking system sound, but we shall also continue to inform the markets as necessary about the boundaries of what we can do. with this, the nation can be assured the bsp shall keep its end of the contract. thank you and good afternoon. krugman, paul ( 2003 ), “ the great unravelling, ”, allen lane, -. 72. 4 / 4