August 16, 2021

In the face of inflation, the BSP is prepared to deploy appropriate monetary policy instruments

BSP Governor Benjamin Diokno said that the Bangko Sentral ng Pilipinas (BSP) is ready to use appropriate monetary policy instruments to protect pricing and financial stability objectives.

“In any case,” he said in a video briefing on Friday, “the BSP is watchful of changing global and local pricing circumstances…

Given the resurgence of demand as countries recover from the epidemic, Diokno thinks the present rise in global commodities prices is just temporary.

While global commodity price variations have an influence on local inflation, he said the central bank is carefully monitoring and evaluating the situation to avoid any indications of supply-side inflation having a second-round effect.

The BSP’s policy-making Monetary Board (MB) raised the central bank’s average inflation projections for each year from 2021 to 2023 by one percentage point, to 4.1 percent, 3.1 percent, and 3.1 percent, respectively, on Thursday.

Diokno ascribed the change to worldwide market increases in food and energy prices.

For example, despite the Organization of Petroleum Exporting Countries (OPEC) and its allies agreeing to reduce production cuts, Dubai crude oil prices remain high owing to the anticipated global economic rebound.

“The BSP remains ready to continue its accommodating monetary policy stance for as long as required to support the economy’s recovery despite the adverse effect of the Covid-19 pandemic,” Diokno added.

“The BSP is also willing to use the policy space available to ensure that monetary policy settings are compatible with the economy’s long-term recovery, as well as its pricing and financial stability mandates,” he said.

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