First, our effective conduct of monetary policy through flexible inflation targeting has led to a low and stable inflation environment that sustains economic growth. Today, the Philippines is one of the fastest growing economies1 in the region. Second, the domestic banking system continues to be fundamentally sound and stable. Banks are well capitalized and benefit from good asset quality, ample liquidity and healthy profitability.
Policy rule prescriptions, particularly prescriptions that are obtained from a dynamic model simulation, also help policymakers take to heart a key message of the literature on policy rules--namely, that monetary policy decisions should concern the appropriate path for the policy instrument and not merely the current setting of that instrument.