monetary authorities still have the firepower and yet be market - friendly in their policy responses? to this, my response is yes. the bsp has recognized long ago the need to deploy a deep toolkit in addressing the contemporary challenges confronting emerging market central banks that are at the receiving end of strong capital flows. it has used a variety of instruments to achieve low and stable inflation, prevent excessive volatility in the exchange rate and maintain broad financial stability. bis central bankers ’ speeches as a result of bsp ’ s signature circumspection, the evidence suggests that the sizable fx inflows have not led to significant adverse macroeconomic and financial consequences. • reserve accumulation in response to the surges in capital inflows does not appear to have led to excessive money creation. • the limited impact of capital flows on monetary aggregate growth suggests that sterilization policies have been broadly effective. • credit growth has not contributed to macroeconomic imbalances, as inflation has remained low. a second – and related – challenge is the need to ensure continued financial stability. the recent global financial crisis showed that sole focus on price stability is not sufficient to attain macroeconomic stability. policymakers need to deliver more than stable prices if they are to achieve sustained and stable growth. price stability does not guarantee financial stability. the bsp, therefore, is attentive to pressure points that could impact on both price stability and financial stability. to ensure financial stability we have utilized prudential measures to manage capital inflows and moderate, if not prevent, the build - up of excesses in specific sectors and in the banking system. prudential policies are the instrument of choice and employed as the first line of defense against financial stability risks. given the current regime of low interest rates – driven in large part by the surge of foreign capital into domestic financial markets and the limited absorptive capacity of the economy in the short term – the bsp is keeping a watchful eye on developments in the asset markets. we pay particular attention to what is happening in the equity and property markets, as these markets are interest - rate sensitive and could be prone to bubbly behavior. we see that while activity in these markets has been buoyant, the key indicators are growing broadly within trend, reflecting both cyclical as well as structural or fundamental forces. it is also important to note that indebtedness in the philippines is still quite low. domestic creditto - gdp ratio at 50. 4 percent

’ s strength is expected to be limited and the euro against the dollar to move in a tight range of 1. 06 – 1. 16 by year - end. british pound the pound sterling lost almost 10 % in value after the referendum result was announced, by 16 % since mid - november 2015 and has not recovered since. of course, the bank of england ’ s measures announced in august have also contributed to avoiding a shock wave in the face of great uncertainty. still, the uncertainty surrounding the timing and the “ type of brexit ” to be implemented, given the size of the current account deficit and the uncertainty around the continuation of foreign capital inflows, poses a big risk for the pound and further depreciation is expected, albeit, at a somewhat lesser extent than originally expected. sterling investors thus face continuing pain for the foreseeable future. as a result, an expected range for the euro against the pound by year - end is between 0. 83 – 0. 90 ( figures 5, 6 ). 4 / 15 bis central bankers'speeches yen my personal view is that the most challenging currency the months ahead is the yen! monetary stimulus has not achieved a lasting weakening of japan ’ s currency and the reflation of the economy is still away. since bank of japan ’ s last policy meeting, the new name of the game for its monetary policy is “ qqe ( qualitative quantitative easing ) with yield curve control ”. although the bank of japan kept interest rates unchanged at minus 0. 1 %, it announced a new framework with two main elements : the first is a pledge to cap 10 - year government bond yields at 0. 0 %. second, the bank of japan has pledged to continue buying assets until inflation “ exceeds the price stability target of 2 % and stays above the target in a stable manner ”. this is a new inflation overshooting commitment. sounds to me a bit optimistic! an expected range for the eur / jpy exchange rate by year - end is between 1. 10 – 1. 25 ( see figure 7 ). 5 / 15 bis central bankers'speeches • equities global equity markets have also recovered from brexit and by mid - july, despite flagging earnings, stock markets in the us had broken through all - time highs, while the emerging market equities experiencing strong performance, returning to levels last seen a year earlier. all three main equity indices ( s & p 500, dow jones,