MANILA – Monetary policy plays a crucial role in mitigating the negative impact of uncertainty and shocks caused by the coronavirus disease 2019 (Covid-19) pandemic, according to the Bangko Sentral ng Pilipinas (BSP).
“Over the past year or so, the BSP decisively pursued an accommodative monetary policy stance to ease financial market stress and provide support to domestic demand,” BSP Governor Benjamin Diokno said in a statement Thursday.
Against a backdrop of low and stable inflation and well-anchored inflation expectations, the BSP mobilized its monetary instruments, which include a cumulative 200-basis point cut in the policy interest rate, an initial scaling down of liquidity absorption operations, and a reduction in the reserve requirement by 200 basis points alongside other extraordinary measures.
“The immediate and timely policy actions undertaken by the BSP during the pandemic were aimed at supporting domestic demand, ensuring the continued functioning of (the) credit market and the financial system, and providing stability to the economy,” Diokno said.
Moreover, the BSP's policy stance reinforced the national government’s broader and direct efforts in mitigating the adverse impact of the pandemic on firms and households.
The present monetary policy stance of the BSP remains oriented towards supporting the ongoing economic recovery amid supply-side pressures and the presence of economic slack, as well as the continued downside risks to domestic demand associated with the Covid-19 pandemic.
Current accommodative policy settings provide ample stimulus to domestic demand that continues to work its way through the economy through private consumption and investment, particularly as public health restrictions continue to ease.
The latest third-quarter growth print supports the view that the Philippine economy is on track for significant recovery over the next few quarters.
The timing of monetary policy normalization will depend primarily on data outturns over the next few quarters.
Looking ahead, the process of gradual normalization of the BSP’s extraordinary pandemic-era measures and monetary policy settings will be outcome-based rather than anchored on a particular date.
The BSP remains committed to supporting a sustainable economic recovery while being guided primarily by the outturns in economic data such as inflation, real sector activity, and liquidity and credit conditions.
At the same time, the BSP remains vigilant against any potential second-round effects from ongoing supply shocks, particularly as the economy continues to recover and restrictions gradually ease and remains ready to respond to threats to the inflation outlook as necessary. (PR)
