Ample monetary space to support recovery: BSP

MANILA – The Bangko Sentral ng Pilipinas (BSP) continues to have ample monetary policy space and believes that the current accommodative policy settings represent appropriate stimulus to demand. 

The BSP said the accommodative policy settings should be allowed to continue to work their way through the economy to bolster private consumption and investment. 

“The BSP’s monetary policy remains oriented towards supporting ongoing economic recovery amid supply-side pressures and the presence of economic slack as well as the downside risks to domestic demand from the impact of the protracted Covid-19 (coronavirus disease 2019) pandemic,” BSP Governor Benjamin Diokno said in a statement Thursday. 

However, heightened risk aversion amid risks to corporate and household balance sheets continue to dampen lending activity. 

Although business and consumer sentiment has gradually improved, domestic demand continues to be tempered by the uncertainty surrounding the pandemic, especially amid the emergence of the Delta variant and the progress of the vaccination rollout in the country. 

Thus, fiscal support remains critical to sustain economic momentum and prevent long-term scarring. 

Continued implementation of targeted fiscal initiatives coupled with efforts to ramp up the vaccination program should help boost market confidence and drive the economic rebound, especially after the restrictions are lifted. 

While the BSP continues to prioritize the use of monetary policy space to provide support to economic activity amid the pandemic, it also remains vigilant and stands ready to respond against emerging risks to its price and financial stability objectives. 

The BSP said it will continue to ensure that the expansion of money and credit, along with fiscal stimulus and low interest rates, will not lead to excessive inflation and trigger financial stability risks. 

When domestic developments warrant a recalibration or withdrawal of policy support, the BSP will properly establish a smooth normalization of its time- and state-bound measures. (PR)