Good recent devts augur well for BSP rate direction

BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said on Sunday that the recent positive developments in the Philippine economy will allow them to keep rates low for a little longer to support the recovery process.

In a Viber message to reporters, Diokno particularly mentioned easing inflation and faster growth prospects as key developments to the reiteration of his monetary policy forward guidance.

“This suggests that the BSP may continue to be patient and continue its accommodative monetary policy stance given the current domestic, external, and financial developments,” Diokno said.

The governor said their latest inflation forecast is now at 4.3 percent on average for 2021, slightly down from the 4.4-percent forecast in September. Their 2022 and 2023 inflation forecasts remain unchanged at 3.3 percent for next year and 3.2 percent for next year.

The governor said headline inflation has already slowed down in October, mainly driven by stabilizing prices for meat and rice, along with the availability of imported supply.

Diokno also said the prospects of the country’s gross domestic product (GDP) “appear bright.”

The governor said a growth rate of 5 to 6 percent in 2021 is “attainable” after the positive expansions in the first three quarters of the year.

Based on recent developments, including the ramped-up vaccine rollout and “ebbing” Covid-19 cases, the DBCC’s growth target of 7 to 9 percent in 2022 and 6 to 7 percent in 2023 also “look doable,” he said.

Diokno also discounted potential wage hikes in the coming months.

“With sufficient slack in the labor market and the expected higher participation rate as workers re-enter the work forces, there is little likelihood of a wage hike as the vaccine rollout quickens and consumer confidence rises while economic activity expands,” Diokno said.

“This is in sharp contrast to the inflationary pressures in developed countries like the US, EU, and UK owing to supply chain bottlenecks and the rising labor expenses,” he added.

Diokno also played down threats in other sectors of the economy.

“There appears to be no pressure on rising real estate prices: real property prices in the National Capital Region [NCR] are either flat or slightly down, though there is a slight increase in prices in few places outside NCR,” Diokno said.

“The threat of peso depreciation is fading as the peso is expected to appreciate, with the prospect of stronger overseas Filipino remittance inflows in the last few weeks of the year in time for the Christmas holidays,” the governor added.

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