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For Luz Wendy T. Noble, Reporter
IT MAY BE “too soon” for the central bank to remove the accommodative measures it implemented at the height of the coronavirus pandemic, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said ahead of the policy review. today, but assured that he is ready to respond if there are signs of second round andffmajor effects onFloridaaction becomes more pronounced.
“It is too early to talk about the exit strategy at this point. We share the view that 2021 will be a year of recovery and that the economy will not return to its 2019 level in the aggregate until perhaps the second half of 2022, ”Diokno said in an online brie.to beWednesday.
“There is a need to maintain monetary policy adaptations as needed while keeping an eye out for threats to prices and to befinancial stability objectives ”, he added.
Last year, the BSP cut benchmark interest rates by 200 basis points to support the crisis-hit economy. This brought rates on central bank reverse repurchase facilities, loans and overnight deposits to all-time lows of 2%, 2.5% and 1.5%, respectively.
At its policy meeting on February 11, the Monetary Board kept rates unchanged but raised itsFloridaation expected this year at 4% from 3.2% previously.
You will meet today to review your policy settings. Nineteen analysts in a Business world Last week’s survey expects the central bank to continue its “prudent pause” to support the government’s goal of achieving economic growth of 6.5% to 7.5% this year after the 9.5% contraction recorded in 2020.
Headline inflation soared to 4.7% in February, already beyond BSP’s 2-4% target for the year and the fastest pace since the 5.1% recorded in December 2018, the government reported earlier this month. Prices have risen due to recent typhoons and the outbreak of African swine fever in the country.
Diokno previously said that they have injected some P2 trillion of additional liquidity into the financial system through central bank policy support. This is equivalent to approximately 10% of the country’s economic output. He confirmed on Wednesday that the central bank is still buying securities on the secondary market.
“The timing of the BSP exit strategy will depend primarily on a number of factors, such as the prospects forFloridaation and production, liquidity and credit condition, to bethe risk of the financial sector, the state of public health, as well as global developments and contagion effects, ”said Diokno.
“The BSP remains attentive to the upward risk factors that may threaten the achievement of theFloridaobjective of the action ”, he added. “If this factor persists and shows signs of spreading alongside demand in the form of an increased clamor for wage increases and transportation fares or high inflation expectations, then the BSP will assess the need for an adequate monetary policy response.”
For now, he said that the higher prices of raw materials caused by supply interruptions are being addressed by non-monetary policy measures of the National Government. These include the maximum price of some meat products in Metro Manila and the relaxed limits on pork imports.
Given that the current price increase is considered “transitory”, Mr. Diokno said that the risks ofFloridaAtions remain “broadly balanced” and could tilt lower by 2022. The central bank expects inflation to average 2.7% next year, below the 4% forecast for 2021.
The central bank chief said they are also monitoring “any emerging risks to financial stability, including the accumulation of imbalances in asset markets.”
“The sustained recovery of the economy, as well as the prevention of the effects of permanent scars, require that the heavy work comes mainly from to behealth and fiscal authorities ”, said Diokno.
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