Bright prospects for emerging economies combined with the prolonged accommodative monetary policies in advanced economies have driven large capital inflows into emerging economies, including the Philippines. Foreign capital inflows can be an important source of funds for investment expenditures but also entail risks that need to be closely monitored and addressed when warranted. Huge capital inflows can contribute to excessive liquidity growth, cause asset market imbalances, and lead to inflation pressures that can complicate monetary policy.