There's room to ease monetary policy, says BSP chief Diokno
MANILA, Philippines — Newly-appointed Bangko Sentral ng Pilipinas Governor Benjamin Diokno on Friday said there is room to loosen monetary policy, but stressed that the timing and magnitude of any tweaks would be “data dependent.”
Diokno, 70, replaces the late Nestor Espenilla Jr. who passed away last February 23 after battling tongue cancer.
Known for his expansionary fiscal policy stance as budget secretary, Diokno — who is widely seen by the market as a dovish BSP governor — will face a tough balancing act of reining in soaring prices without hurting the economy amid a softer global outlook.
“There is an opportunity for us to do some cuts. Again, it will be based on data, the evidence and what the situation at that time. So the timing is important,” Diokno said at his first press conference as BSP chief.
“I think given the decelerating inflation in the Philippines, there is an opportunity for monetary easing. But as I said that will be dependent on the data that will be given to us,” he added.
Diokno will chair his first policy meeting on March 21.
Under Espenilla’s watch, the BSP hiked its policy rate by a cumulative 175 basis points to 4.75 percent last year after inflation hit a near-decade high in September and October. Soaring prices have eased since then.
In February, headline inflation decelerated to 3.8 percent, the first time in a year since the monthly rate fell within the central bank’s 2-4 percent target range.
The late BSP governor was also vocal about his goal of gradually reducing banks’ required reserves to single-digit level. Last year, the BSP trimmed the reserve requirement ratio twice to 18 percent from a global high of 20 percent in a bid to fuel economic growth.
Before he was sworn into office, Diokno on Wednesday told a news conference that the central bank can “expedite” the RRR cut.
He also said inflation could slow down to 2 percent next quarter due to base effects. If realized, this would settle at the bottom of the government’s 2-4 percent target band.
In the same press briefing on Friday, Diokno underscored that “as always, our decisions on the monetary policy stance will remain data dependent.”
“There’s room for monetary easing if the present situation continues. Now, when? We will announce it at the appropriate time,” he said. “We have to be more careful. The important thing is timing.”
Diokno will complete the remainder of Espenilla’s six-year term, which the market had expected to be finished by any of the three central bank deputy governors.
Before assuming the position of BSP chief, Diokno was part of Duterte’s economic team tasked with supercharging growth to 7-8 percent through heightened state spending and by delivering on a massive infrastructure program.
“In pursuing policy continuity, let me also assure you that the BSP will sustain its institutional independence, with the monetary board acting as a collegial body,” Diokno said.
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