For instance, inflation risks remain, in part due to relatively high liquidity growth, as remittances remain strong and growing confidence in the economy brings with it a steady inflow of foreign investments. This is the same “problem of plenty” that faces other countries in Asia. To address this, we need to be creative and use non-traditional instruments.
Last May, for instance, we adopted preemptive measures to absorb liquidity. While it is too early to assess the effect of these measures, initial results are encouraging, and the inflation outlook remains benign even as the economy continues to power ahead. There is also no let-up in our campaign to encourage banks to strengthen their balance sheets through asset cleanup, capital buildup, and consolidation.