MANILA — The Philippine central bank’s monetary policy will remain supportive of the economy until recovery is “firmly underway”, its governor said on Thursday, while assuring markets it will clearly communicate is exit strategy from easy policy.
While the Federal Reserve’s stimulus withdrawal could exert pressure on emerging central banks to follow suit, the decision by the Bangko Sentral ng Pilipinas’ (BSP) to unwind rate cuts will depend on the domestic inflation outlook, Governor Benjamin Diokno said.
Inflation is forecast to remain manageable and that would allow the central bank to continue to provide monetary stimulus to the real sector, Diokno told a media briefing.
“The BSP will remain to be data dependent in policymaking. This prudent practice will help us avoid the premature withdrawal of policy support,” Diokno said.
The BSP kept interest rates at a record low of 2.0% for a fifth straight meeting on June 24, and economists believe the central bank would keep it at that level to ensure the economy, which was hit hard by pandemic-induced lockdowns, will bounce back.
The Philippines has been battling one of Asia’s worst and longest-running COVID-19 outbreaks. It lowered its economic growth targets for this year and next after a deeper-than-expected contraction in gross domestic product in the first quarter.
It has gradually eased COVID-19 curbs to encourage business activity and allow greater mobility, but the speed at which it can fully reopen depends on its vaccinations progress.
As of Tuesday, 3.89 million people, or 3.5% of the 110 million population, have been fully vaccinated. —Reporting by Neil Jerome Morales Writing by Karen Lema Editing by Ed Davies, Martin Petty