Philippine bank chief signals policy tightening

The Philippine central bank chief said on Sunday that domestic inflationary pressures were driven by supply-related factors that do not require monetary policy intervention, and that tightening policy too soon would be more harmful than waiting.

Inflation slightly eased in September to 4.8 per cent.

“Since the inflation pressures are coming from the supply side, there appears to be no justification for monetary intervention,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in a statement.

The BSP has kept its key interest rate at a record low for the past seven policy meetings, citing manageable inflation and uncertain growth outlook. Diokno’s comments suggested

accommodative policy settings would remain in place to support the economy’s recovery from the impact of the pandemic.

“To me, the harm that tightening monetary policy too soon exceeds the harm of moving too late, given that the Philippine economy is at its nascent state of economic recovery,” Diokno said. In any case, he said the BSP would decide on the appropriate timing of its policy change based on the evidence at the time of such decision, and “won’t be influenced by opinion makers, market analysts or Twitters”.

The BSP expects average inflation this year to be about 4.5 per cent.