The Bangko Sentral ng Pilipinas yesterday gave the assurance there is enough liquidity in the system and that the manageable inflation environment provides monetary policymakers some room to keep the policy stance accommodative in support of the country’s economic recovery from the COVID-19 crisis.
Benjamin Diokno, BSP Governor, in a speech delivered at the Sulong Pilipinas 2021 yesterday, said the economy is “at the tailend of the crisis, with the rollout of vaccination program ongoing.”
Diokno said the BSP recognizes that “economic recovery is still in its early stage and, as such, expansionary monetary support remains warranted.”
“The accommodative monetary policy settings provide significant stimulus to demand and should be allowed to continue to work their way through the economy to bolster recovery in private consumption and investment,” Diokno said.
Among the BSP’s long list of COVID-response measures was the series of policy rate cuts last year totaling 200 basis points, meant to influence banks to lower their lending rates as well, thereby encouraging credit- taking to support economic activities.
The policymaking Monetary Board late March maintained the key rates of the BSP.
The interest rate on the BSP’s overnight reverse repurchase facility stays at 2 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.
The BSP also cut the reserve requirement for universal and commercial banks as well as for smaller banks last year.
The BSP sees inflation to slightly breach the target range this year but will ease within the 2 to 4-percent target band next year.
Slower price increases for the heavily-weighted food basket pulled inflation lower to 4.5 percent in March from a two-year high of 4.7 percent posted a month ago, bringing the average inflation in the first quarter of 2021 to 4.5 percent, exceeding the top end of the government’s full-year target range of between 2 and 4 percent.
“The favorable inflation outlook and stable banking system, plus the speed of financial digitalization happening in the economy, are good reasons to be confident about the Philippines’ medium and long-term growth prospects,” Diokno said.
He added since the onset of the pandemic, the BSP has infused over P2 trillion in liquidity into the financial system, equivalent to 11 percent of the country’s gross domestic product.
“There’s enough liquidity in the system,” Diokno said.
BSP data showeddomestic liquidity (M3) rose by 9.4 percent year-on-year to about P14 trillion in February 2021. This was faster than the 8.9-percent growth in January.
