This facility, which allows short-term financing, does not serve as a long-term source of funds for the government because they are temporary, time-bound, and capped. The BSP has also purchased government securities in the secondary market to lift market confidence. However, this activity has been scaled down, as the economy recovers.
If, on the other hand, prices rise for exogenous reasons, the subsequent disinflationary policy course can actually enhance the central bank’s reputation. The phase following German reunification is a case in point.