Inflation targeting and a more tolerant exchange-rate stance

In 2002, Bangko Sentral ng Pilipinas formally adopted inflation targeting as its monetary policy framework, replacing the looser, multiple-indicator approach used in the years immediately following the 1997-98 crisis. The shift built directly on the lessons of that crisis: having seen how costly it was to defend a currency level while inflation spiraled, BSP chose to anchor policy explicitly to a published inflation target instead, while allowing the peso to move more freely in response to trade and capital flows. BSP's own 2009 retrospective credits this framework, paired with more tolerant exchange-rate management, as a 'signal achievement' underpinning the relatively stable monetary conditions the Philippines enjoyed through the 2000s despite global shocks including the 2008-09 financial crisis. That stability, together with resilient remittance inflows from overseas Filipino workers that kept domestic consumption supported even when exports or investment weakened, helped set the stage for the sustained, comparatively high growth the Philippine economy recorded through the 2010s, a marked turnaround from the crisis-prone pattern of the late 1990s.