To maintain price stability, the BSP adopted the Inflation Targeting framework in 2002. This has served us well. We continuously refine monetary policy conduct. The implementation of the interest rate corridor system in July 2016 is a manifestation of our commitment. More refinements are coming. These changes are enhancing the transmission channels of monetary policy.
During the 1970’s, however, the Bretton Woods System of fixed par values was replaced with the global system of floating exchange rates and over-stimulation with expansionary monetary and fiscal policies created inflationary pressures and persistent balance of payments crisis situations. The emphasis in macroeconomic policy gradually shifted from demand-side management to supply-side expansion in which monetary policy was assigned a different role.