BANGKO Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. had defended its moves to tame inflationary pressures in the country, following rising concerns on their ability to bring inflation back to their target range.
“We assure that our monetary- policy responses to elevated inflation pressures were, and are, timely and appropriate,” Espenilla said in a recent speaking engagement.
The BSP has been under fire for letting inflation slip above their current 2 percent-to-4 percent target range.
In the first five months of the year, inflation averaged at 4.3 percent, with the June inflation hitting 5.2 percent.
BSP estimates show that consumer prices are still likely to go up and reach their peak in the third quarter of the year.
Just this month, congressmen discussed how to stop the rise of inflation, with House Committee on Economic Affairs Chairman Arthur Yap of Bohol saying the BSP must enact an off-cycle move to increase rates and stabilize the situation.
“The increase in rates will mop up the market’s excess liquidity that may possibly rein in runaway prices and stave off further weakening of the peso,” Yap earlier said.
However, Espenilla, in his speech on Tuesday, said their moves are “informed by a wide set of economic data.”
“Our two successive rate hikes in May and June were measured and deliberate responses to the evolving economic environment and dynamic market conditions meant to help anchor inflation expectations and temper second-round effects, firmly signaling our commitment to ensuring price stability,” the governor said.
The current BSP main policy rate now stands at 4 percent after the back-to-back hike in the last two meetings. In their June meeting, Espenilla also said “further moves are still on the table” should the inflationary environment warrants action from the BSP.
“We reaffirm our strong commitment to ensure that inflation returns to target by 2019. We stand ready to take decisive action in a timely manner to address emerging risks that could threaten the attainment of this target,” the governor said further in his speech.
The BSP chief also said the moves of the Central Bank should not always mirror the normalization moves of the United States Federal Reserve (the Fed), given the difference in their scale.
“As an inflation-targeting Central Bank, we allow foreign-exchange flexibility so that we can conduct independent monetary policy primarily focused on assessment of domestic conditions, and is thus not based on actions of the Fed,” Espenilla said.
“Nevertheless, we consider external factors and exchange-rate movements if these will materially impact the pursuit of domestic objectives, especially inflation. This approach is most appropriate for a small open economy like the Philippines,” he added.
The BSP Monetary Board is scheduled to meet again to set monetary policy levers on August 9. This will be the fifth monetary-policy meeting of the BSP Monetary Board for the year.