Philippine rate hike depends on recovery pace

26 Nov 2021

The Philippine central bank may withdraw the ultra-loose monetary policy introduced during the pandemic if there was a clear indication the economic recovery was on a stronger footing.

This is according to the governor of Bangko Sentral ng Pilipinas (BSP), Benjamin Diokno during an online press briefing.

“The timing of monetary policy normalisation will depend primarily on data outturns over the next few quarters,” Diokno stated.

“Looking ahead, the process of gradual normalisation of the BSP’s extraordinary pandemic-era measures and monetary policy settings will be outcome-based rather than anchored on a particular date.”
Following calls from a number of sectors for a rate hike to control price increases, the central bank head said it was focused on supporting a sustainable economic recovery, whilst being steered by data such as inflation, real estate activity, liquidity and credit conditions, says an Inquirer report.

“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,” he added.

The governor went on to say that the low interest rate environment bolstered the government’s wider, direct efforts in reducing the impact of the Covid crisis.

“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,” he said.

“The immediate and timely policy actions undertaken by the BSP during the pandemic were aimed at supporting domestic demand, ensuring the continued functioning of credit market and the financial system, and providing stability to the economy,” Diokno added.

The BSP’s monetary policy stance is still aimed at supporting the ongoing economic recovery during supply pressures and the risks to domestic demand linked to the pandemic.