Loading presentation...

Present Remotely

Send the link below via email or IM


Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.


Inflation Targeting and Monetary Policy

No description

kathryn Puyat

on 6 April 2014

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Inflation Targeting and Monetary Policy

Definition of Terms
Current Approach:
Inflation Targeting
How does
Inflation Targeting Work
1980's-1990's : Philippine Monetary Framework 1
A Brief History of
Philippine's Monetary Policy
Inflation Targeting and Monetary Policy
Alejandrea Lalata
Jenny Rose Chua
Patricia Limiac
Kathryn Puyat
Marien Fajardo


A set of measures of actions, to affect the supply of money and credit in the economy.
Aimed at influencing the timing, cost and availability of money and credit, as well as other financial factors, to stabilize the price level of goods and services.
Rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
A central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation.
Too much money supply induces consumers to increase their demand for goods and services.
If this increased demand is not matched by higher production, prices go up.
Conversely, too little money to support consumption and investment tends to reduce the demand for goods and services. Given the same level of supply, lower demand for goods and services causes prices to fall.
The relationship between money, output and inflation is stable and predictable.
Changes in money supply (on the assumption that velocity is stable over time) are directly related to price changes or to inflation
BSP is able to determine the level of money supply that is needed given the desired level of inflation that is consistent with the economy's growth objective.
BSP controls inflation indirectly by targeting money supply.

June 1995 - Present: Philippine Monetary Framework II
Allows base money levels to go beyond target as long as the inflation rates are met
An excess of one or more percentage points of inflation over the program induces mopping up operation by the BSP to bring down base money to the previous month’s level
BSP wanted to address the fact that aggregate targeting did not account for the long-run effects of monetary policy on the economy.
With this approach, the BSP can exceed the monetary targets as long as the actual inflation rate is kept within program levels and policymakers monitor a larger set of economic variables in making decisions regarding the appropriate stance of monetary policy.
Public announcement of an inflation rate that a country will target for the coming years, or in a given period of time
Focuses on maintaining a low level of inflation
Main Goal: Price Stability
Inflation target is measured through the Consumer Price Index (CPI)
Requirements for the
successful adoption of
Inflation Targeting
Firm commitment to price stability
Central bank independence
Good forecasting ability
Sound financial system
Does the Philippines meet all these requirements?
Central Bank independence
Yes, the law provides fiscal and administrative independence to the BSP as the central monetary authority
Central Bank commitment
Yes, the law mandates that the BSP should be concerned primarily with maintaining price stability.
Good forecasting ability
Inflation forecasting models are continuously being improved; these are supplemented by judgment and discretion given available economic and financial indicators.

BSP also publishes the Inflation Report and the minutes of relevant Monetary Board discussions on monetary policy

BSP stands firmly behind the inflation target and, should there be any deviations, explains the reasons to the public and higher authorities
Sound financial system
Financial system is constantly developing, partly in view of the measures implemented by supervisory authorities to strengthen it.
Inflation Targeting Framework
Evaluation of current
Philippine situation.
Question Time
Thank You!
Good Day and God Bless
Full transcript