Bangko Sentral says not yet inclined to tighten monetary policy

ABS-CBN News

Posted at Mar 11 2021 04:42 PM

Bangko Sentral says not yet inclined to tighten monetary policy 1
Bangko Sentral ng Pilipinas Governor Benjamin Diokno. George Calvelo, ABS-CBN News file photo

MANILA - The Bangko Sentral ng Pilipinas is not inclined to tighten monetary policy at this time, despite supply-side factors keeping inflation above the 2 to 4 percent target range, BSP Governor Benjamin Diokno said on Thursday.

In a regular virtual briefing, Diokno said inflation expectations were on the rise but remained within target over the medium term, despite the headline figure hitting a 26-month high in February. 

“Like most central banks, the BSP recognizes that not all increases in inflation are the same. Inflation targeting central banks like the BSP seek to respond mainly to demand-driven increases in inflation rather than to short‐term price fluctuations, which are usually caused by commodity-specific supply disruptions,” said BSP Governor Benjamin Diokno in a statement.

Inflation quickened to 4.7 percent in February as food prices climbed driven by supply shortages caused by the African swine fever.

The BSP however said the spike should be viewed as temporary
and noted that core inflation has been generally stable, which supports the view that demand-side price pressures remain mostly subdued. 

The BSP raised its forecast for average inflation this year to the upper-end of its 2 to 4 percent target range, from 3.2 percent previously. But it lowered its inflation forecast for next year to 2.7 percent from 2.9 percent, well within the same target range.

“The challenge for monetary authorities is in finding the right balance between seeking to reduce inflation and avoiding the further weakening of the real sector. We will continue to evaluate in the coming months if adjustments in the policy stance will be warranted, keeping in mind the continuing need for sustained policy support to facilitate the strong recovery of the economy,” Diokno said.

The BSP kept its monetary policy settings steady last month to support the country's pandemic-hit economy.

The BSP will hold its next policy meeting on March 25.

- With reports from Reuters

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