However, such an approach would not be consistent with the truth. For a start, signs of overheating in the housing market were clearly evident through the second half of 2002 and all through 2003, yet the Bank did not change monetary policy. It was only when it became clear that good economic growth had returned both globally and domestically that rates were raised.
These tools allow the BSP to manage the build-up of systemic risk in the financial system by setting aside additional capital as reserves during good times and as insurance or buffers for bad times. Despite all these positive developments, there are still challenges on the horizon.