BSP chief vows to keep inflation, forex in check

  • A rejuvenated governor of the Bangko Sentral ng Pilipinas (BSP) has placed keeping inflation in check, the gradual reduction of banks’ reserve requirement ratio and game-changing market reforms on top of his agenda after surviving a health scare.
  • In his first speaking engagement after declaring he was cancer-free, BSP Governor Nestor Espenilla Jr. said in a keynote address during the General Membership Meeting of the Management Association of the Philippines (MAP) monetary authorities are paying careful attention to signs of higher inflation becoming more broad-based and persistent.
  • Espenilla said the BSP wants to make sure that inflation expectations remain consistent with the 2-4% target between 2018 and 2020.
  • According to Espenilla, the favourable inflation environment has allowed the BSP to promote greater economic activity as inflation was kept within the target range for the past six years.
  • However, inflation leapt to 4.5% in Feb 18 from 4% in Jan 18, bringing the average inflation in the first two months to 4.2%. The Feb 18 inflation figure was slightly above the target, but within the latest forecast of 4.3% set by the central bank.
  • Espenilla also reiterated the decision of the Monetary Board to reduce the “ultra-high” reserve requirement ratio to 19% from 20% effective 2 Mar 18 was an operational adjustment to support the shift toward a more market-based implementation of monetary policy.
  • On the other hand, Espenilla said the peso continues to reflect the day-to-day market operations. The peso is the weakest performing currency in the region after it breached the PHP52 to USD1 level.
  • The depreciation of the local currency has mirrored the continued bullish sentiment on the economy’s growth performance and prospects as showed by the strong demand for imports, residents increased direct and portfolio investments abroad, and debt prepayments, according to Espenilla.
  • Espenilla said the economy may grow above 6% in the next three years.

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