MANILA, Philippines—The central bank’s ultra loose monetary policy during the pandemic, which dumped P2.2 trillion in liquidity into the Philippine financial system, helped ease the worst effects of the COVID-19 catastrophe on the economy, according to the agency’s chief.

At an online press briefing, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno also said withdrawing these measures would happen if there was clear evidence that economic recovery is on firmer footing.

“The timing of monetary policy normalization will depend primarily on data outturns over the next few quarters,” Diokno said.

“Looking ahead, the process of gradual normalization of the BSP’s extraordinary pandemic-era measures and monetary policy settings will be outcome-based rather than anchored on a particular date.”

Amid calls from some sectors for an interest rate hike to keep price increases in check, the BSP chief said the agency remained committed to supporting a sustainable economic recovery, while being guided primarily by economic data, like inflation, real estate activity, liquidity and credit conditions.

“At the same time, the BSP remains vigilant against any potential second-round effects from ongoing supply shocks, particularly as the economy continues to recover and restrictions gradually ease, and remains ready to respond to threats to the inflation outlook as necessary,” he said.

At the briefing, Diokno noted that the low interest rate environment reinforced the national government’s broader and direct efforts in cushioning the adverse impact of the pandemic on firms and households.

“Over the past year or so, the BSP decisively pursued an accommodative monetary policy stance to ease financial market stress and provide support to domestic demand,” he said.

Against a backdrop of low and stable inflation and well-anchored inflation expectations, the BSP mobilized its monetary instruments, which included:

  • A cumulative 200-basis point cut in the policy interest rate
  • An initial scaling down of liquidity absorption operations
  • Rreduction in the reserve requirement by 200 basis points
  • Other extraordinary measures

“The immediate and timely policy actions undertaken by the BSP during the pandemic were aimed at supporting domestic demand, ensuring the continued functioning of credit market and the financial system, and providing stability to the economy,” Diokno said.

He added that the current monetary policy stance of the BSP remains oriented towards supporting the ongoing economic recovery amid supply-side pressures and the presence of economic slack, as well as the continued downside risks to domestic demand associated with the COVID-19 pandemic.

Diokno said the current accommodative policy settings provide ample stimulus to domestic demand that continues to work its way through the economy through private consumption and investment, particularly as public health restrictions continue to ease.


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