BSP ready to tighten pol­icy again if needed

Business World - - Front Page -

THE BANGKO SENTRAL ng Pilip­inas (BSP) is ready to tighten mone­tary pol­icy fur­ther to rein in prices and sup­port the peso if needed, Deputy Gov­er­nor Diwa C. Guini­gundo said.

“If the peso de­pre­ci­a­tion will im­pinge on our abil­ity to main­tain the sta­bil­ity of prices, we will not hes­i­tate to sus­tain our vig­i­lance and con­tinue to tighten mone­tary pol­icy,” Mr. Guini­gundo said in an in­ter­view in Bali on Wed­nes­day.

“Our pri­mary man­date is price sta­bil­ity and we in­tend to do just that.”

The BSP has de­liv­ered 150 ba­sis points of in­ter­est-rate in­creases since May, among the most ag­gres­sive in Asia. Pol­icy mak­ers are bat­tling surg­ing prices and a weak­en­ing cur­rency with the Philip­pines among those in Asia hard­est hit by an emerg­ing-mar­ket rout.

In­fla­tion ac­cel­er­ated to 6.7% in Septem­ber, the fastest pace in more than nine years, mainly on food and fuel prices.

That could have been the peak as mea­sures in­clud­ing the rate hikes start to take ef­fect, Mr. Guini­gundo said.

The cen­tral bank’s tar­get is for an­nual in­fla­tion to aver­age 2-4% in 2019 and 2020. In­fla­tion could go back to the tar­get range next year once a bill that lib­er­al­izes rice im­ports

is passed and im­ple­mented, Mr. Guini­gundo said.

Tax in­creases on fuel, sug­ary drinks and cig­a­rettes im­ple­mented at the start of the year have boosted prices. Short­ages in the sup­ply of rice, the na­tion’s sta­ple food, and a more than seven per­cent slump in the cur­rency this year, fur­ther ex­ac­er­bated price pres­sure.


Mr. Guini­gundo said he re­mained op­ti­mistic about the coun­try’s eco­nomic growth prospects, cit­ing in­creas­ing pro­duc­tiv­ity and the gov­ern­ment’s in­fra­struc­ture spend­ing.

Gross do­mes­tic prod­uct growth slowed to a three-year low of six per­cent in the se­cond quar­ter, with the gov­ern­ment set to re­port third-quar­ter data on Nov. 8.

“Even if you have the im­pact of the 150-ba­sis points tight­en­ing of mone­tary pol­icy, I think we should have some cush­ion or coun­ter­weight in terms of gov­ern­ment spend­ing on in­fra­struc­ture,” he said.

Pres­i­dent Ro­drigo R. Duterte has started a $170-bil­lion pro­gram to up­grade the na­tion’s di­lap­i­dated air­ports, roads and bridges.

The cen­tral bank ex­pects greater sta­bil­ity in the cur­rency in the fourth quar­ter as re­mit­tances from over­seas Filipinos come in ahead of the holidays.

Asked to com­ment on the per­cep­tion that of­fi­cials acted too late and now have to do more to curb in­fla­tion, Mr. Guini­gundo said mar­ket par­tic­i­pants and econ­o­mists should look at the big­ger pic­ture.

“This is a man­i­fes­ta­tion of tyranny of the mar­ket” as mone­tary pol­icy can’t be used to solve sup­ply is­sues, the cen­tral bank of­fi­cial said. —

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