BSP to maintain accommodative policy amid pandemic uncertainties

The Bangko Sentral ng Pilipinas (BSP) on Thursday cited the need for accommodative policy settings to continue in a bid to boost the economy amid uncertainties brought about by the COVID-19 Delta variant.

In a virtual briefing, BSP Governor Benjamin Diokno said that while economic activity continues to gradually rise closer to pre-pandemic levels, the spread of more transmissible COVID-19 variants could impact recovery.

“As such, monetary policy remains oriented towards supporting domestic demand amid the presence of economic slack and the continued downside risks to recovery,” he told reporters.

“The BSP believes that the current accommodative policy settings should be allowed to continue to work their way through the economy to bolster the recovery in private consumption and investment,” he added.

In its latest policy meeting, the Monetary Board kept key policy rates unchanged at record lows, but hiked its inflation forecast for this year to 4.1% from 4.0%, and for both 2022 and 2023 at 3.1% versus the earlier outlook of 3.0%.

The Philippines on Thursday reported 16,621 new confirmed cases of COVID-19, bringing the country’s active cases up to 146,510. The total caseload stands at 2,020,484, including 1,840,294 recoveries and 33,680 deaths.

“The BSP will continue to ensure that policy responses will not lead to excessive inflation and trigger financial stability risks,” he said.

“When developments warrant a recalibration or withdrawal of policy support, the BSP will ensure a smooth normalization of its time- and state-bound measures,” he added.

Diokno also noted the need for the continued fiscal support which he said is “critical” to sustain economic momentum and prevent long-term scarring, along with the continued implementation of targeted fiscal incentives.

“Direct fiscal support continues to be imperative given rising risks to household and corporate sector balance sheets and labor displacements resulting from a prolonged recourse to lockdown measures,” he explained.

In the same briefing, Diokno noted that the central bank continues to have ample monetary space, and current settings should be allowed to work their way into the economy and boost private consumption and investment.—LDF, GMA News