The Bangko Sentral ng Pilipinas (BSP) on Thursday again kept policy rates at record highs in November in a bid to boost economic activity amid the COVID-19 pandemic.
In a virtual briefing, BSP Governor Benjamin Diokno said the policy-making Monetary Council has decided to keep interest rates unchanged – the overnight repo facility at 2.00%, demand deposit at 1.5% and overnight loan facility at 2.5% – for the eighth consecutive month.
“The Monetary Board maintains that keeping a patient hand on the political levers of the BSP, as well as appropriate fiscal and health interventions, will keep the economic recovery more sustainable in the coming quarters,” Diokno said.
“There is still room to keep monetary policy parameters stable in a manageable inflation environment,” he said.
Interest rates or monetary policy rates are tools used by central banks to influence the money supply, which allows the economy to function while keeping inflation under control.
“The Monetary Board also observed that economic growth appears to be gaining ground, driven by improved mobility and sentiment amid calibrated easing of quarantine protocols and continued progress in the government’s vaccination program. Nonetheless, the Monetary Council noted that sustained measures to protect public health and well-being remain crucial to facilitate the recovery of investment and employment, ”said Diokno.
The economy as measured by gross domestic product (GDP) – the total value of goods and services produced in a country during a specific period – grew by 7.1% in the third quarter, a reversal from a contraction of 11.4% over the same period last year. although lower than the 12% growth recorded in the second quarter of 2021.
Since the start of the year, the country’s GDP has grown 4.9%, within the upper limit of the government’s revised target range of 4% to 5% for 2021 as a whole.
While it expects inflation to slightly exceed the upper end of the government’s 2% to 4% target range in 2021, the BSP has lowered its inflation outlook to 4.3% from to its previous projection of 4.4%.
“The latest baseline forecast is broadly unchanged from the previous assessment cycle,” Diokno said.
The BSP, however, kept its outlook for 2022 and 2023 at 3.3% and 3.2%, respectively.
“In the meantime, inflation is expected to stabilize near the midpoint of the target range in 2022 and 2023, as the recent rise in global crude oil prices, the stronger recovery in domestic economic activity and the slight depreciation The peso have been mainly offset by lower than expected inflation in recent months. Inflation expectations have also remained firmly anchored in the baseline projection path, “said the central bank chief.
Risks to the inflation outlook have moved up for next year, although they remain broadly balanced for 2023, Diokno said.
“The upside risks are primarily related to the potential impact of weather disruptions on the prices of key food commodities, demands for higher freight rates and the possibility of a prolonged resumption of domestic pork supplies.” , did he declare.
“Strong global demand amid persistent supply chain bottlenecks could also put further upward pressure on international commodity prices. Uncertainties in the food supply require determined reforms to improve the productivity and competitiveness of farms, ”he added.
The BSP chief said the central bank would continue to prioritize providing political support to the economy while keeping an eye out for potential risks to future inflation.
“The BSP is ready to react to the potential second round effects resulting from the pressures on the supply side, in line with its price stability and financial objectives,” said Diokno.
In an emailed comment, the chief economist of Rizal Commercial Banking Corp. Michael Ricafort said the pursuit of an accommodative monetary policy is a major pillar of the country’s economic recovery program.
“This helps to keep short-term borrowing / financing costs relatively low, which in turn stimulates greater demand for loans / credit which in turn helps stimulate / encourage more investment as well as the creation of more jobs / jobs and generates more business / economic activities, ”said Ricafort.
“An accommodating monetary policy would do even more of the heavy lifting for the economy, given the lack of funds for additional stimulus measures, given the constraints presented by the widening budget deficit and overall debt levels these days. recent months due to the COVID-19 pandemic / lockdowns, ”the economist said. – VBL, GMA News