NextGen Day

According to the Bangko Sentral ng Pilipinas, monetary policy is critical in mitigating the negative impact of uncertainty and shocks caused by the coronavirus disease 2019 (Covid-19) pandemic (BSP).

“Over the last year or so, the BSP has steadfastly pursued an accommodative monetary policy stance to relieve financial market stress and support domestic demand,” BSP Governor Benjamin Diokno said in a statement on Thursday.

The BSP mobilized its monetary instruments in response to low and stable inflation and well-anchored inflation expectations, including a cumulative 200-basis-point cut in the policy interest rate, an initial scaling down of liquidity absorption operations, and a 200-basis-point reduction in the reserve requirement, among other extraordinary measures.

“During the pandemic, the BSP’s immediate and timely policy actions were aimed at supporting domestic demand, ensuring the continued functioning of (the) credit market and the financial system, and providing economic stability,” Diokno said.

Furthermore, the BSP’s policy stance bolstered the national government’s broader and more direct efforts to mitigate the pandemic’s negative impact on businesses and households.

The BSP’s current monetary policy stance remains focused on bolstering the ongoing economic recovery in the face of supply-side pressures and economic slack, as well as the ongoing downside risks to domestic demand posed by the Covid-19 pandemic.

Current accommodative policy settings provide ample stimulus to domestic demand, which continues to flow through the economy via private consumption and investment, especially as public health restrictions loosen.

The Philippines’ economy is on track for a significant recovery in the coming quarters, according to the latest third-quarter growth data.

The timing of monetary policy normalization will be largely determined by data outcomes in the coming quarters.

Looking ahead, the BSP’s extraordinary pandemic-era measures and monetary policy settings will be gradually normalized based on outcomes rather than a specific date.

The BSP remains committed to promoting a long-term economic recovery, guided primarily by economic indicators such as inflation, real-world activity, and liquidity and credit conditions.

Simultaneously, the BSP remains vigilant against any potential second-round effects from ongoing supply shocks, particularly as the economy recovers and restrictions gradually ease, and is prepared to respond to threats to the inflation outlook as needed.

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