THE Bangko Sentral ng Pilipinas (BSP) is likely to take a “preemptive” stance should inflationary pressures start to arise in the economy.
Speaking at the Economic Journalists Association of the Philippines (EJAP) mid-year economic forum on Tuesday, BSP Governor Benjamin Diokno said that even though inflation went down slightly in March, April and May, they are still on the lookout for potential risks that may arise.
“We will carefully scan the operating environment with a forward-looking perspective to move in preemptively to address any risks to our price stability mandate,” the governor said.
“The BSP will remain vigilant over the current inflation dynamics to ensure that the monetary policy stance continues to support economic recovery to the extent that the inflation outlook would allow,” the governor added.
In the first three monetary policy meetings for the year, the BSP has opted to keep rates at their record-low levels despite rising inflation numbers in order to support the local economy. The BSP will meet again for their next monetary policy meeting on June 24.
For the financial sector, Diokno said the BSP will intensify its monitoring and surveillance over its supervised institutions to ensure that they remain responsive to emerging risks.
Diokno also said they will put in place regulations to promote the continued soundness, stability, resilience and inclusivity of the banking system, particularly through the pursuit of enhanced digitalization.
For the external sector, the BSP governor said they will support policies that will help strengthen the economy’s resilience to external shocks, including that of maintaining a market-determined exchange rate, keeping a comfortable level of reserves, and keeping the country’s external debt manageable.
In their meeting in May, the BSP revised their inflation forecast for the year to 3.9 percent, down from the 4.2 percent forecast in their February meeting.
The BSP attributed the downward revision to the impact of the lower tariff on imported pork and the lower-than-expected inflation for March and April.
BSP officials also said the continued contraction in the country’s first quarter gross domestic product (GDP) and the continued appreciation of the peso will also help push down price pressures.
For next year, however, the BSP revised their target higher from 2.8 percent to 3 percent due to the expected increase in global crude oil prices and faster economic prospects.