Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they continued to have “ample monetary room for maneuver” and reiterated that the current accommodative parameters remain appropriate, but will require time for policy responses to make their way into the economy and stimulate the private sector. consumption and investment.
“The BSP will continue to ensure that policy responses do not lead to excessive inflation and do not trigger risks to financial stability,” Diokno said in his weekly “GBED talks”.
“When national developments warrant a recalibration or withdrawal of political support, the PASB will ensure a smooth normalization of its time-bound and state-limited measures,” he added.
Diokno said the current accommodative policy parameters represent an appropriate stimulus for demand.
“BSP’s monetary policy remains geared towards supporting the ongoing economic recovery amidst supply-side pressures and the presence of an economic slowdown as well as downside risks to domestic demand due to the economic downturn. ‘impact of the protracted COVID-19 pandemic, “he also said.
Diokno said they continue to monitor heightened risk aversion amid risks to corporate and household balance sheets. “However, while liquidity remains plentiful, bank lending remains constrained by high risk aversion,” he said.
The BSP noted that business and consumer sentiment has gradually improved but domestic demand continues to be tempered by uncertainty surrounding the pandemic, particularly amid the emergence of the Delta variant and the progress of the roll-out of vaccination in the country.
Diokno reiterated that budget support remains essential to maintain economic momentum and avoid long-term scars.
The BSP has injected 2.2 trillion pesos in additional liquidity into the financial system since the start of the pandemic. There are other supportive policies to ensure that the economy will not be too damaged due to the lockdowns.
These are measures designed to encourage market confidence by making available low-cost credit resources, such as cuts in the policy rate and reserve requirements, Diokno said. Last year, the BSP cut the benchmark rate by 200 basis points and kept the policy rate low at 2% since November 2020.
“The key rate cut was intended to induce banks to reduce their own lending rates, thereby promoting lending activity (while) the decline in reserve requirements increased the volume of loanable funds,” Diokno said.
Diokno earlier called for “cautious optimism” after the government lowered its GDP forecast from 6-7% this year to 4-5%, taking into account the impact of the current foreclosure of the Delta variant.
The accommodating monetary policy of the BSP proved useful with the recovery of the GDP in the second quarter with a significant growth of 11.8%.
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