BSP says accommodative monetary policy kept amid manageable inflation


Posted at Oct 21 2021 08:17 PM

MANILA - Inflation remains manageable and thus monetary policy will remain “accommodative”, the Bangko Sentral ng Pilipinas said on Thursday, days after BSP Gov. Benjamin Diokno said that interest rate hikes were unlikely for the year.

The BSP said year-on-year headline inflation rose to an average of 4.5 percent in the third quarter from 4.3 percent in the previous quarter, bringing average inflation for the year to 4.5 percent. 

Inflation in July showed to 4 percent before accelerating to 4.9 percent in August, and slightly slowing to 4.8 percent in September.

While the third quarter average was higher than the government’s 2 to 4 percent target for the year, core inflation remained steady at 3.2 percent in the third quarter, the central bank said.

Core inflation excludes food and fuel products, which tend to have large swings in prices. 

“In response to the manageable inflation environment, the BSP maintained its accommodative monetary policy settings during the third quarter of 2021 mainly to sustain the economy’s nascent recovery,” Diokno said during Thursday’s online briefing.

Food inflation rose due mainly to supply disruptions owing to weather disturbances and transport bottlenecks with the reimposition of strict quarantine restrictions. Meanwhile, non-food inflation eased as transport inflation slowed down due to base effects, the BSP said. 

Risks to the inflation outlook shifted towards the upside for the rest of 2021 but remained broadly balanced for 2022 and 2023, the BSP added.

“Upside risks could emanate from pressures on international commodity prices amid improving global demand and lingering supply-chain bottlenecks, as well as the potential effects of weather disturbances and a possible prolonged recovery from the ASF outbreak,” the BSP said.

Meanwhile possible delays in the lifting of containment measures could further dampen global growth and domestic demand, and the continued risk of COVID-19 infections continues to pose downside risks to the outlook, the central bank added.

The BSP kept the interest rate at its lowest level of 2 percent for 7 consecutive policy meetings. There are 2 more policy meetings before the end of the year. 

But Diokno has said that “the harm from early monetary tightening exceeds the harm of moving too late, given the nascent state of economic recovery."


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