Central bank credibility intact: BSP chief

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Tuesday that the preemptive monetary responses he has been making since the coronavirus outbreak began will continue to maintain confidence in the BSP, which is “resolved in its intention. to provide timely information and sufficient support to the economy, as needed. “

Diokno, the fifth governor of the BSP, reiterated yesterday, after the government published a low inflation for September of 2.3 percent from 2.4 percent in July, that the central bank has an ongoing review to improve the transmission of monetary policy and ensuring that it will support economic recovery after a pandemic. induced recession.

He said that the BSP, which is ready to use its many policy arsenals to cushion the impact of COVID-19 on the economy, “will continue to assess the transmission of monetary actions from the BSP to the economy in conjunction with recently approved fiscal measures to address the economic costs of the public health crisis “.

September inflation of 2.3 percent was within the central bank’s forecast range of 1.8 percent to 2.6 percent.

“The latest result is consistent with BSP’s assessment that inflation is expected to remain benign over the policy horizon with the balance of risks sloping downward due in large part to the impact on the national and global economic activity of possible deeper economic shocks caused by the coronavirus pandemic, ”Diokno said. He also said that the “significant monetary easing and liquidity improvement measures carried out by the BSP and the timely implementation of fiscal measures in the Bayanihan Law 2 provide sufficient support for the economic recovery in the coming months.”

Diokno reiterated that as lockdown protocols are further relaxed, the economy is gradually improving, as seen in the manufacturing and foreign sectors.

“Extraordinary times call for extraordinary measures,” he said Monday in a Citi Macro Conference online forum. “The BSP decisively implemented a wide range of policy responses, including some unprecedented, to address the crisis head-on.”

One of the contributions of the BSP to the anti-COVID-19 response was to be one of the first central banks in the world to cut official rates in February as a preventive action against the health crisis. In June, the BSP lowered the key overnight interest rate by 175 basis points.

During its last monetary policy meeting, on October 1, the BSP kept its key rate unchanged while waiting for the fruits of the monetary transmission, which has a lag of nine to 12 months. It also lowered its inflation forecasts for 2020, 2021 and 2022.

In addition to using its existing toolkits to help the economy, including lowering the reserve ratio to free up additional cash to the banking system while blocked, the BSP also provided interim advances to the government, bought government securities on the secondary market, and diverted funds to the small and medium-sized business sector through the implementation of various measures that are favorable to MSMEs.