CURRENT inflationary pressures will not force the Central Bank to hike monetary policy rates, as their latest assessment continues to confirm that the elevated price growth remains transitory, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said on Sunday.
Speaking to reporters via Viber on Sunday, Diokno said while central bankers and policy-makers seem divided on the path of inflation, the BSP’s assessment continues to show inflation retreating to within target levels in the coming months.
“The BSP staff forecasts that average inflation this year will be about 4.5 percent, slightly above the upper range of the target 2 to 4 percent. Inflation is expected to settle at an average of 3.3 percent in 2020,” Diokno said.
“What’s the implication on monetary policy? Since the inflation pressures are coming from the supply side, there appears to be no justification for monetary intervention. For example, would an interest rate hike bring about higher world crude supply? Of course not,” Diokno said.
The BSP has been keeping its record-low monetary policy rates for the entire year in an effort to support the country’s recovery.
However, some market analysts raised concerns on how long the BSP can keep its accommodative monetary policy stance, especially as inflation remains elevated.
Diokno said risks to the inflation outlook may appear to be on the upside over the near term, but broadly balanced for 2022 and 2023.
“As a result of increasing inflation pressures, a number of central banks in the world have started to raise interest rates. Many have decided
to wait.
To me, the harm that tightening monetary policy too soon exceeds the harm of moving too late, given that the Philippine economy is at its nascent state of economic recovery,” Diokno said.
“In any event, based on the evidence at the time of its decision, the Monetary Board will decide on the appropriate timing of its policy change. It won’t be influenced by opinion makers, market analysts or twitters,” he added.
The monetary board is scheduled to meet for their monetary policy setting meeting on November 18. This will be the seventh monetary policy meeting of the BSP for the year.