Interest rates to stay low until recovery firmly underway–Diokno | Inquirer Business

Interest rates to stay low until recovery firmly underway–Diokno

By: - Business News Editor / @daxinq
/ 05:24 AM July 16, 2021

The Philippines will remain awash in cheap cash to help encourage growth until the central bank sees clear signs that the economy’s recovery from its deepest postwar slump is well underway, according to the head of the agency.

In an online briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno also sought to reassure markets that any monetary policy tightening by the US Federal Reserves—the world’s most influential central bank—could be withstood by the local financial system.

“In the Philippines, monetary policy should remain supportive until recovery is firmly underway,” he said.


The BSP chief added that the timing as well as the conditions under which the regulator would start unwinding some P2.2 trillion worth of monetary stimulus rolled out during the pandemic would continue to be guided by the domestic inflation and growth outlook over the medium term. With signs of broad improvement in economic performance and a relatively more manageable pandemic situation in some economies, markets expect central banks, including the US Fed, to consider a possible shift to policy normalization. “Amid this, the BSP’s monetary policy response and timing of implementation will continue to be guided by our inflation and growth outlook over the policy horizon and the risks surrounding such outlook, including developments on the external front and domestic demand conditions,” Diokno said.


“Such data-dependence in policy-making will allow the BSP to avoid the premature withdrawal of policy stimulus,” he added.

Inflation is projected to be within-target over the policy horizon as recent price pressures from transitory supply factors were mitigated by nonmonetary measures as well as downward pressure from the current economic slack.

“We continue to have ample external liquidity buffer to withstand adverse external shocks, including the possibility of an earlier than anticipated US policy rate hike. Continued progress with vaccination and health measures alongside fiscal policy support also underpin our projection of favorable economic growth prospects once we enter the postpandemic phase,” said the Governor.

Moving forward, he said the BSP would remain vigilant against emerging risks to the outlook for inflation and growth, including the possible spillover effects from external developments.

Diokno added that the BSP was ready to adjust its monetary policy settings as necessary to ensure that its primary mandate of price stability conducive to a balanced and sustainable economic growth was achieved.

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TAGS: Governor Benjamin Diokno, Interest rates‎

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