After 225 bps (basis points) rate hikes, Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the current BSP monetary policy stance is still accommodative and supportive of a sustained economic growth.
Medalla as of two days ago is still saying that the BSP’s policy rate, which is 4.25 percent as of Sept. 22, remains “quite low”.
“While we have hiked by a cumulative 225 bps, our policy settings remain accommodative. The real policy rate is still quite low,” he said in a forum recently.
But, more than ensuring growth, Medalla said the BSP is all about inflation management which is its core mandate.
“Achieving a target-consistent path of inflation is of paramount concern to us. ‘Target-consistent’ does not mean that we will always be below 4 percent. What we mean by target-consistent is that while we are above 4 percent, we are quite confident that with the passage of reasonable amount of time, inflation will go back to the midpoint of our target,” he explained.
“Then, respectable growth is still possible under these terms, but for the BSP, our price stability pillar, of course, is the primary concern,” added Medalla.
Medalla said the depreciating peso which as of Oct. 14 was back to below P59 again at P58.935, is adding more pressures to the country’s high inflation.
He said adjustments to the peso is “healthy” but if the peso depreciation is resulting to more build up of inflationary pressures, this is where the BSP has to intervene, not just participate in the exchange rate market.
Medalla said the peso-US dollar market has “strengthenedthe case to act and to act decisively.”
The peso fell to its lowest close on record at P59 versus the US dollar on Oct. 3, Oct. 10 and Oct. 13. To prevent the peso from falling further and disrupting the inflation path, the BSP has lifted the key rate by a cumulative 225 bps in the last five policy meetings in a row, one of them an off-cycle decision.
The BSP’s average inflation forecast for this year is 5.6 percent and 4.1 percent for 2023. Both years have inflation projections that are above the two-four percent target range.
As of end-September, the average inflation rate was at 5.1 percent. In September, inflation rose to 6.9 percent from 6.3 percent in August.
The BSP said its recent policy actions are intended to bring inflation and inflation expectations back to the target to ensure the balanced and sustainable growth of the economy in the medium term.
“The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability,” said the BSP.