The approach to price stability in the Philippines has evolved, reflecting shifts in economic theories, policy approaches, and global best practices. The central bank’s role in maintaining price stability has become more sophisticated, emphasizing inflation targeting, data-driven analysis, and proactive policy adjustments to manage inflation while supporting overall economic growth.
Policy response. The Central Bank responded with tighter monetary policies, including higher reserve requirements and interest rate adjustments. However, these measures were often constrained by broader economic and political factors. Emergence of inflation targeting. Toward the end of the 1990s, there was a global shift toward inflation targeting as a framework for monetary policy. The Philippines moved in the same direction, although full adoption came later.
New challenges. New challenges emerged in the aftermath of the global financial crisis, thus requiring careful balancing between growth and inflation objectives. 1949: Establishment of the Central Bank of the Philippines. The Central Bank of the Philippines was established post-independence in 1949, primarily to stabilize the country’s monetary system.
1970s-1980s: Centralization and control. Under martial law, the government implemented policies that increased the centralization of economic decision-making, and the Central Bank was instrumental in this process. This included control over foreign exchange, regulation of banking activities, and the supervision of credit.
Shift to system-wide supervision: This period marked the beginning of the shift in supervision toward a more holistic, system-wide approach. The BSP also began to focus on the stability and soundness of the banking system rather than just individual entities. 2010 onwards: Further evolution and challenges. The 2007-2008 global financial crisis led to further refinements in supervision, emphasizing systemic risk, stress testing, and crisis management.
Central Bank’s role. The Central Bank of the Philippines played a central role in overseeing and facilitating these transactions, although the system was relatively rudimentary. Real-Time Gross Settlement System: The introduction of the RTGS system was a significant step, allowing for the immediate and final settlement of large-value interbank transfers.
PESONet and InstaPay. Key developments under the NRPS included PESONet for batch electronic fund transfers and InstaPay for real-time low-value fund transfers.