BSP Bills improves inflation control – Diokno

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said that the central bank’s ability to issue its own securities will improve both liquidity and inflation control, especially after infusing over 1.4 trillion of dollars of money supply in the financial system since the pandemic began.

“We understand that debt investors keep a close eye on inflation. With our own debt instruments, the BSP further enhances our ability to maintain a low and stable inflation environment, ”said Diokno.

The BSP issued its first BSP securities as 28 Day BSP Notes last Friday. Diokno, in an investor forum, said the new facility will be an effective additional monetary policy instrument under the interest rate broker system.

In a comment over the weekend, BSP Lieutenant Governor Francisco G. Dakila Jr. also noted strong demand for the new 28-day or 1-month BSP bills. BSP awarded the P20 billion offer in full.

“The BSP will gradually adjust auction volumes based on market response and consistent with liquidity forecasts,” said Dakila.

BSP Bills in their first auction attracted P43.4 billion bids or 2.2 times the volume of the bid, with a weighted average interest rate of 1.8355 percent.

“The auction results reflected strong demand, and banks priced the 28-day BSP bills relatively close to the 28-day TDF (term deposit facility) rate,” said Dakila.

At the end of August, the additional liquidity provided by the BSP to the market or the financial system reached 1.4 trillion pesos or the equivalent of 7.3 percent of gross domestic product.

Diokno said his “monetary toolbox is far from exhausted” and that the BSP “is ready to do more if necessary.”

The BSP, to stimulate the recovery of the economy, has so far reduced the policy rate by a cumulative 175 basis points this year, reducing interest rates to 2.25 percent, the lowest in the rate’s history. policy of the BSP.

Diokno remained confident that monetary transmission to effectively support the recovering economy remains adequate, and that the prevailing interest rate environment and ample liquidity are conducive to economic activity.

You have seen signs of recovery in domestic activity in recent months. He said that the BSP will continue to review and evaluate the transmission of the BSP’s policy actions.

The BSP has revised up its inflation forecast for this year to 2.6 percent from 2.3 percent and also raised the forecasts for 2021 and 2022 to three percent from 2.6 percent and 3.1 percent from three percent.

The benign inflation environment has allowed the BSP to keep interest rates low, which are already negative in real terms.