The Bangko Sentral ng Pilipinas will keep its monetary policy stance accommodative for “a few more quarters” to avoid stalling the economy’s recovery from the pandemic.
BSP Governor Benjamin Diokno said the central bank will be “patient” when it comes to lifting rates, adding that there is no “one-size-fits-all” approach in tackling the pandemic’s economic onslaught.
“Each country is different. I’ve seen many crises in the past. I’m comfortable where we are. For example. We have hefty gross international reserves, we have steady inflows of foreign exchange,” Diokno said.
The BSP embarked on an aggressive easing episode that culminated in November last year which saw policy rates fall to historic-low 2%. The rapid-fire rate cuts — complemented with additional reduction to banks’ reserve requirement — were meant to stimulate credit growth in an economy starved of consumption by the pandemic.
In Asia, South Korea was the first nation to tighten policy rates in the hopes of reigning in rising household debt and rallying home prices back in August this year.
The BSP’s worry is that any rate hikes at the moment could throw the economic recovery off the track. Diokno said the BSP’s previous easing episode was “felt” by the economy only recently when bank lending finally snapped eight consecutive months of contraction to return to positive territory in August.
While red-hot inflation is already pressuring other central banks to tighten monetary policy, Diokno said the BSP can take its time because the country’s external position is strong enough to withstand capital outflows.
“I remember in the past that when there was a crisis, we run out of dollars servicing our foreign debt. Right now, foreign debt is not as huge as before. In fact our GIR (gross international reserve), are much higher than foreign debt of the Philippines, to think that our debt is long-term and medium-term,” the BSP boss said.
“We’re confident with what we have already deployed. As what we are finding out to what extent right now, given what we have deployed. This is sufficient for the time being. There’s no need for additional monetary action on our part,” he added.
The BSP’s powerful Monetary Board will meet on Thursday to review the current monetary policy settings.