DESPITE the recently announced acceleration in the country’s inflation rate and the impending US monetary policy normalization, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno is keeping his resolve to maintain low interest rates for as long as possible to support economic recovery.
In a briefing on Thursday, the BSP chief said their latest forward guidance on monetary policy still reflects their commitment toward preserving adequate policy support “for as long as necessary” to ensure the sustainability of economic recovery.
“The emerging outlook of a manageable inflation and nascent growth allows the BSP to maintain its accommodative monetary policy stance to help strengthen domestic demand and support business and consumer confidence, thereby facilitating the growth momentum to gain further traction in the coming months,” Diokno said.
Forward guidance pertains to public statements from central banks concerning the likely future path of monetary policy settings based on the latest economic and financial developments.
Inflation in the country recently shot back up to 4.9 percent and hit its highest in more than two years. The US Fed, meanwhile, said that the US economy has made progress toward its goals of price stability and maximum employment and may start hiking its rates soon.
“The anticipated normalization in US monetary policy has led to some concerns regarding its financial market implications, particularly for emerging economies,” Diokno said.
“The Philippine economy is well-placed to weather an environment of tighter global financial conditions in the event of US monetary tightening, given the economy’s macroeconomic fundamentals and the continued availability of policy space from authorities,” he added.
The governor also said that against a backdrop of a more challenging global economic environment, the BSP “remains focused” on preserving the appropriately supportive stance of monetary policy amid emerging risks to the recovery outlook.
Diokno said emerging risks including the possible spillovers from external developments that may affect domestic inflation dynamics, capital flows, and the exchange rate.
“The BSP will continue to carefully communicate its future policy intentions to reduce uncertainty and foster a quicker and durable recovery,” Diokno added.