THE slight dip in the country’s inflation numbers in March affirmed the Bangko Sentral ng Pilipinas continued accommodative stance to support the ailing economy, the BSP governor said on Tuesday.
In his statement after the Philippine Statistics Authority (PSA) announced the 4.5-percent March inflation, BSP Governor Benjamin Diokno said the latest outturn is consistent with their initial expectations.
“The Monetary Board is of the view that prevailing monetary policy settings remain appropriate to support the government’s broader efforts to facilitate the recovery of the economy,” Diokno said.
“At the same time, the Monetary Board emphasizes that the timely implementation of nonmonetary interventions is crucial in mitigating the impact of supply side pressures on inflation and thereby preventing them from spilling over as second round effects,” it added.
In its March monetary policy meeting, the BSP Monetary Board decided to maintain their accommodative stance, of a record-low interest of 2 percent, despite inflation expectations rising above the 2- to 4-percent target range for the year.
ING Bank economist Nicholas Mapa said they still expect the BSP to continue its accommodative monetary policy stance despite the rising inflation to support the economy.
“We expect BSP to keep policy rates at 2 percent in order to bolster the economic recovery with several regions now under strict lockdown due to a recent spike in new Covid-19 infections. BSP will only consider recalibrating monetary policy should second-round effects such as wage hikes become apparent or if inflation expectations become disanchored,” Mapa said.
Despite this, the BSP chief expressed readiness to take monetary policy action once inflation pressures get out of hand.
“The BSP will remain watchful for any signs of inflation becoming broader based. The BSP is prepared to take immediate measures as appropriate to ensure that the monetary policy stance continues to support the BSP’s price and financial stability objectives,” the governor said on Tuesday.
Looking ahead, Diokno also said the balance of risks to the inflation outlook remains broadly balanced around the baseline path in 2021, while leaning toward the downside in 2022.
“Tighter domestic supply of meat products and improved global economic activity could lend further upward pressures on inflation. However, the ongoing pandemic also continues to pose downside risks to the inflation outlook, as the recent surge in virus infections and challenges over mass vaccination programs continue to temper prospects for domestic demand,” Diokno said.
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