Diokno: No more ‘reactive’ policies vs inflation

Smarting from last year’s inflation crisis, the head of the country’s central bank—the person chiefly responsible for keeping local consumer prices in check—last week recommitted the monetary authority to acting against rising consumer prices before they reach crisis levels.

Speaking before the Rotary Club of Manila, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the moves of policy-makers henceforth “will be preemptive rather than reactive,” as along as there would be empirical data to support early action.

Many market watchers criticized the BSP last year for what they believed was a delayed response to rising inflation, signs of which had begun to appear early in the year, and peaking at a near-decade high of 6.7 percent in September and October.

The BSP started to tighten monetary policy only in May 2018, by which time the inflation crisis was already in full swing.

“Rest assured that the future policy actions of the BSP will continue to be guided by the following principles: our primary focus will be price stability; we will be preemptive rather than reactive; and our policy will be data-driven and evidence-based,” Diokno said.

Since assuming office in March of this year—and with inflation on a clear downtrend —the former Budget secretary has eased monetary policy aggressively, with a combination of interest rate and reserve requirement reductions.

Diokno said he had no problem with adopting a “pro-growth” stance, even if the central bank’s primary mandate was to maintain price stability.

“Looking ahead, we will continue to monitor domestic and global developments to ensure that the BSP is able to meet its inflation targets,” he said. “The BSP is also ready to use all appropriate measures as needed to ensure an inflation environment conducive to sustainable growth of the Philippine economy.”

The BSP expects inflation to remain on a “target-consistent” path for 2019 and 2020, with the latest baseline forecasts indicating that price increases will average at 2.9 percent this year. The inflation forecast for next year is slightly higher at 3.1 percent, due largely to the rebound in global crude oil prices.

In his speech, Diokno also reassured businessmen that the Philippine economy remained sound and was, in fact, “one of the best performing economies in the world” with “extremely bright” prospects.

“If you have money to invest, this is the best time to invest in the Philippines,” he said. “Do not delay, do not waver. Because if you do, You will regret it.”