BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the timing of their monetary policy support unwinding is not set in stone and will still largely depend on evolving data on the economy’s recovery.
In a virtual briefing on Thursday, Diokno told reporters that they continue to be patient in still keeping monetary policy rates at record lows amid the early expectations of growth and tamer inflation in the economy.
“The decision on the timing and circumstances under which BSP will unwind its pandemic-induced support measures depend primarily on the evolution of various factors,” Diokno said.
“These include domestic forces such as the outlook on inflation and output, liquidity and credit conditions, financial sector risks, state of public health, as well as global developments and spillovers,” he added.
In 2020, the BSP let out its most aggressive cycle of monetary policy easing yet to the total of 200 basis points and pushed the monetary policy rate of the country to its all-time low to support the economy during the pandemic. For the rest of 2021, the BSP opted to keep the record-low rates steady.
“When domestic developments warrant a scale-down of policy support as economic recovery gains traction, the BSP will ensure a smooth transition in winding down its time and state-bound measures,” the governor said.
Several local and international economists have projected the BSP would start hiking its policy rates next year as cases continue to drop and the economic prospects continue to improve.
The latest of these is international think tank Fitch Solutions. In an assessment published earlier this week, the research arm of the Fitch Group said the BSP will begin hiking its policy rate in cycle in 2022, forecasting the policy rate to rise from 2 percent as of end-2021 to 2.75 percent by the end of next year.
“With the Philippines still in the process of relaxing domestic Covid-19 restrictions and vaccinating its population, the economic normalization process will stretch into 2022. As such, we believe the BSP will take a gradual approach to monetary policy normalization,” Fitch Solutions said.