Central Banking

The BSP sells government securities to increase the money supply.

The BSP's purchase of public works bonds worth P500 million has a contractionary effect on liquidity.

The foreign exchange market involves the actual exchange of two currencies.

The Special Deposit Accounts (SDA) facility was introduced in 1998 to enable the BSP to expand its toolkit in liquidity management.

Rediscounting is a standing credit facility provided by the BSP to help banks meet long-term liquidity needs.

Reserve requirements apply to peso demand, savings, time deposit and deposit substitutes (including long-term non-negotiable tax-exempt certificates of time deposit or LTNCTDs) of universal banks, (UBs) and commercial banks (KBs).

The BSP formally adopted inflation targeting as the framework for monetary policy in January 2002.

The BSP created an Advisory Committee which deliberates, discusses and recommends to the Monetary Board the appropriate monetary policy stance that will enable the BSP to achieve the desired inflation target.

Direct instruments enable the BSP to control directly certain items in the bank's balance sheets which may be in the form of financial prices of quantities.

Open market operations (OMO) are used by the BSP to control the prices of goods and services.