THREE PILLARS of CENTRAL BANKING

BSP
INTRODUCTION

The Bangko Sentral ng Pilipinas is primarily task with

promoting low inflation and a healthy financial system. To
carry out its mandate, the BSP focuses on the three main
areas or pillars of central banking.
1. Price Stability
2. Financial Stability
3. Efficient Payment and Settlement System
Price Stability
Price Stability

• This entails keeping inflation low to promote economic

efficiency and improve the well being of Filipinos.
• Price stability refers to the condition of low and stable
inflation. By keeping inflation low, the BSP helps ensure
strong and sustainable economic growth and better living
standards. With price stability, prices of goods do not rise
too quickly and people have a degree of certainty when
deciding how to spend, save or invest their money.
Important Points

 A low and stable inflation rate improves the well being of the population.
Such low inflation is beneficial for the economy. How?

 Low inflation encourages consumers to buy goods and services.

Delaying will mean that they would have to pay more for the same product.
 Low inflation also makes it more appealing to borrow money, since
interest rates are usually also low during periods of low inflation.
 Businesses and households must spend more time, and money, protecting
themselves from the effects of rising costs and prices
Price Inflation
• occurs when average prices
are rising above this low and
predictable rate
• occurs due to shortage
• Money and other monetary
items are worth less all the
time during inflation.
VS. Price Deflation
• occurs when average prices
are falling below this low and
predictable rate
• occurs due to surplus
• Money and other monetary
items are worth more all the
time during deflation
Importance of price stability

• Price stability implies avoiding both prolonged inflation

and deflation. Inflation is a rise in the in the
general price level of goods and services in an economy
over a longer period of time resulting in a decline in the
value of money and purchasing power an environment of
price stability, businesses and other economic agents do
not have to hedge against inflation and can therefore put
the available resources to productive use. The nominal
orientation of tax and social security systems creates
distortions in the economy, which may be kept in check
by lower inflation.
Causes of Inflation

• The Money Supply. Inflation is primarily caused by an

increase in the money supply that outpaces economic
growth
• The National Debt
• Demand-Pull Effect
• Cost-Push Effect
• Exchange Rates
Other Related Terms

• Purchasing power is the value of a currency expressed in

terms of the amount of goods or services that one unit of
money can buy.
• Consumer purchasing power measures the value in
money for which consumers may purchase goods or
services.
• Inflation risk, also called purchasing power risk, is the
chance that the cash flows from an investment won't be
worth as much in the future because of changes
inpurchasing power due to inflation.
To be continued!!!!!!
Financial Stability
Financial Stability

• is a property of a financial system that

dissipates financial imbalances that arise endogenously in
the financial markets or as a result of significant adverse
and unforeseeable events. Hence, financial stability is
essential for maintaining confidence in the economy.
• is a state in which the financial system, the
key financial markets and the financial institutional system
is resistant to economic shocks and is fit to smoothly fulfil
its basic functions: the intermediation of financial funds,
management of risks and the arrangement of payments.
Financial Stability

• Financial stability can be defined as a condition in

which the financial system as a whole – comprising
banks and other financial

• Financial stability describes the condition where the

financial intermediation process functions smoothly
and there is confidence
• Make savings
• Control your impulse spending.
• Evaluate your expenses, and live frugally.
• Invest in your future.
• Keep your family secure.
• Eliminate and avoid debt.
• Pay bills immediately, or automatically.
Financial stability for the long term can be determined by
multiplying your annual living expenses by 22 to find out the
amount of money you need when you retire.
For example, if your expenses add up to 80,000 per year,
then 80,000 X 22 = 1,760,000.
Then 1,760,000 will be the amount of money you needed to
be financially stable after retirement.
Other Related Terms

• Financial intermediation
- a productive activity in which an institutional unit incurs
liabilities on its own account for the purpose of
acquiring financial assets by engaging
in financial transactions on the market.
• Financial Intermediaries
- move funds from parties with excess capital to parties
needing funds. The process creates efficient markets and
lowers the cost of conducting business.
Other Related Terms

• Supervision
- a workplace activity in which a manager oversees the
activities and responsibilities of employees he manages. It
is an important job function for managers at all levels
throughout your company. Coaching, training and employee
development are among the common responsibilities
assumed by a supervisor.
> Effective supervision provides a safe space for workers to
reflect on their practice, as well as to develop skills and
knowledge.
Benefits of Supervision

• Better outcomes for service users.

• Better professional relationships.
• Opportunities to reflect and link knowledge and practice.
• Increased confidence.
• Skill development.
• Greater awareness and understanding.
• Reduced stress.
Methods that will help you gain trust and improve your supervisory skills.

1.Give Trust to Get Trusted: As a Supervisor,

you should let your team know that you trust
them and believe in them.

2.Be Reliable: You can let your team rely on

you when an experienced person is needed to
complete the job.
Supervisor Responsibilities

Setting goals for performance and deadlines in ways that

comply with company's plans and vision.
Organizing workflow and ensuring that employees
understand their duties or delegated tasks.
Monitoring employee productivity and providing
constructive feedback and coaching.
 Efficiency Vs. Effectiveness

• is about doing things • is about doing the right

rightly. things.
• Performing or • describes getting to an
functioning in the best outcome even if it takes
possible manner with the longer
least waste of time and
effort.
To Be Continued!!!!!!