The framework also calls for flexibility of the exchange rate so that we can conduct independent monetary policy primarily focused on domestic conditions. Nevertheless, external factors are always considered. We also react to excessive exchange rate volatility particularly if this affects inflation expectations and poses a risk to the inflation outlook.
Our IT framework has been reinforced with the adoption of the interest rate corridor (IRC) system in 2016. With the development of auction-based instruments complementing the overnight reverse repurchase borrowing rate as the policy rate signal, the BSP has expanded its options for maintaining firm monetary control.