THE Bangko Sentral ng Pilipinas (BSP) stands firm that the country’s current accommodative monetary policy stance remains appropriate even as some central banks across the world are starting to signal a “normalization path” in the coming months.
BSP Governor Benjamin E. Diokno said in a virtual news briefing last Thursday he is keen on keeping the country’s monetary policy stance supportive of the recovery path of the domestic economy.
“The prevailing manageable inflation outlook, together with the downside risks to domestic demand, continues to underpin the BSP’s overall stance of providing policy support to ensure a sustained economic recovery,” Diokno told reporters.
The governor said that while improvements to global demand will have positive spillovers to the domestic economy, an earlier-than-expected normalization in major central banks could lead to a sharp tightening of global financial conditions, with adverse effects on some emerging markets.
In the case of the Philippines, Diokno said the BSP remains prepared for “any potential volatility in capital flows and exchange rate movements: that could arise from the normalization process.”
“Overall, the Philippines remains in a robust position to withstand external headwinds on account of its sound macroeconomic fundamentals, which include a manageable inflation outlook, a prudent fiscal position, a sound banking system, ample external buffers, and a stable investment grade rating,” the governor said.
Diokno also said they will continue to be guided by domestic considerations, particularly the outlook for inflation and economic growth, in deciding the direction of the country’s monetary policy.
“The BSP stands ready to deploy appropriate policy measures as needed consistent with its price and financial stability objectives,” the central bank chief said.
In their September monetary policy meeting, the BSP decided to maintain the country’s all-time low monetary policy rates despite their expectation that the country’s inflation path is higher than earlier expected.
The BSP chief said despite the looming inflationary pressures, prevailing monetary policy settings remain appropriate as price growth remains “manageable” and growth outlook remains uncertain.
“Keeping a steady hand on the BSP’s policy levers will allow the momentum of economic recovery to gain more traction by helping boost domestic demand and market confidence,” Diokno earlier said.