BSP sticks to loose monetary policy ’til inflation eases

 

The central bank says it is expecting inflation to be within the annual 2-4 percent target range, although most likely at the upper end due to the rising global oil prices.

 

MANILA — The Bangko Sentral ng Pilipinas (BSP) maintains that keeping an accommodative policy is still alright as inflation is expected to ease due to improving supply conditions.

“Keeping an accommodative stance shall also help us counter risk aversion among banks which continue to temper credit activity despite liquidity in the financial system,” says BSP Governor Benjamin E. Diokno.

Headline inflation in June slowed to a six-month low of 4.1 percent on easing transport prices and slower increase in the food price index, although it marked the sixth consecutive month of inflation beyond the 2-4 percent target.

“We believe that the prevailing monetary policy stance remains appropriate especially as price pressures are expected to dissipate further with the continued implementation of non-monetary supply-side measures by the Government,” says Mr Diokno.

The Monetary Board has kept the policy rate at a record low of 2 percent in its last policy review in June, citing the need to retain support as the new coronavirus variants pose risks to economic recovery.

Economists observe a decline in bank lending for the sixth straight month in May by 4.5 percent, as banks and borrowers remain cautious amid the crisis.

They say average inflation forecast for 2021 and 2022 are at 4 percent and 3 percent, respectively. (JD/Headline PH)

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