The Philippines: BSP set to begin tightening cycle

  • BANGKO SENTRAL ng Pilipinas (BSP) Governor Benjamin E. Diokno said the space for keeping an accommodative policy is shrinking, amid rising inflation risks and the economy’s return to pre-pandemic level in 1Q22.
  • “The space for maintaining an accommodative policy stance has considerably narrowed given how the Apr 22 inflation of 4.9% settled near the higher end of the BSP’s forecast range of 4.2% to 5% [for the month],” he said at an online briefing.
  • Mr. Diokno said the better-than-expected 8.3% gross domestic product (GDP) growth in 1Q22, and ongoing downside risks “strengthen the case for a withdrawal of monetary policy accommodation.”
  • “While the BSP stands ready to deal with these risks to inflation and economic growth, any adjustments in the monetary policy stance will be done in a timely manner so as not to disrupt the growth momentum while preventing price pressures from becoming entrenched,” he said.
  • The BSP chief’s more hawkish signals on policy came a day before the third rate-setting meeting of the Monetary Board for 2022.
  • Mr. Diokno said second-round effects are “starting to manifest.” The recent approval of wage hikes in the National Capital Region and Western Visayas may signal further increases in other regions.
  • Wage petitions have been put on hold since the pandemic began in 2020. The Labor department said the recently approved wage hikes in Metro Manila and Western Visayas will take effect on 3 Jun 22.

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