Metro Manila (CNN Philippines, July 16) — Domestic economic factors such as price increases and economic issues, not what’s happening overseas, are the prime considerations taken into account by the Bangko Sentral ng Pilipinas when it crafts monetary policy, according to the head of the nation’s central monetary authority.
“While the BSP monitors external developments, including the monetary policy actions of the US Fed and other central banks, it does not need to recalibrate monetary policy settings based on these factors,” BSP Governor Benjamin Diokno said during his recent weekly briefing on Thursday.
A few weeks ago, the US Federal Reserve said it expects to finally raise interest rates in 2023 – a move considered as hawkish and sooner than expected by market watchers.
Prior to the announcement, the US central bank projected policy rates would remain near zero in the coming two years, according to CNN Business.
“However, we recognize that any signal of unexpected tightening in US monetary policy is tail risk that could exert undue stress on global financial markets,” Diokno added.
The central bank chief again emphasized that inflation and growth outlook over the policy horizon, along with risks surrounding it, will continue to guide the central bank’s monetary policy response and timing of its implementation.
The BSP continued to keep interest rates at a record-low of 2% since November’s surprise cut, in a bid to stimulate hampered economic activity amid the COVID-19 crisis.
Diokno and other BSP officials have maintained that monetary policy will remain accommodative until strong, sustained signs of economic recovery become evident.
Under an accommodative policy stance, the central bank expands the money supply to boost the economy. Such policies include lowering key interest rates to make borrowing less expensive and encourage spending.
“Broadly speaking, the BSP can consider withdrawing monetary support when there are indisputable indications of a strong recovery in real sector activity, as well as a sustained downtrend in community transmission of the virus,” Diokno said.
