Philippine central bank Governor Benjamin Diokno said the monetary easing cycle isn’t over and that he wants to keep interest rates low through the end of 2022.
Even after cutting its benchmark interest rate by 200 basis points this year as the country grapples with a deep recession and one of Asia’s worst coronavirus outbreaks, Bangko Sentral ng Pilipinas still has “some monetary space” available, Diokno said in an interview with Bloomberg Television.
WATCH: Philippine central bank Governor Benjamin Diokno discusses the outlook for the economy, monetary policy and the local currency.
(Source: Bloomberg)
Policy makers left rates unchanged at 2.00% last week. The central bank also has deployed a spate of liquidity-boosting and credit-relief measures this year, as the government avoids outsized spending packages to preserve the country’s sovereign credit rating.
“We’re not in the end of the line but I think this is the time for another pause. After all, we have been very aggressive,” Diokno told interviewers Haslinda Amin and Rishaad Salamat. “We’re confident that inflation remains benign” and price increases will stay within the government’s 2%-4% range over the policy horizon, he said.
The government sees the economy shrinking by as much as 9.5% this year, before growing by at least 6.5% next year.
The government sees the Philippine economy shrinking as much as 9.5% this year, before growing by at least 6.5% next year. Diokno said Tuesday the economy should show positive growth in the first quarter of next year and return to its pre-pandemic level by mid-2022.
Rates will remain low until the economy is growing by about 6.5%-7.5% and unemployment has come down to the 5% range, Diokno said. He ruled out cutting the benchmark rate below zero -- as some other central banks have done during the pandemic -- saying, “that’s not part of our policy framework.”
“Right now, we’re confident that the monetary policy settings remain appropriate,” he said. “We believe that an accommodative monetary policy along with fiscal policy initiatives” should help the economy recover.
The governor also said policy makers were “comfortable” with the level of the peso -- which is near a four-year high after appreciating 5.4% against the dollar this year -- and said the bank wouldn’t intervene just to keep the peso at a specified level.
“We do not actually meddle with the exchange-rate market,” he said. “We pursue a flexible exchange rate. We only enter the market to smooth the fluctuation.”
The central bank is next scheduled to meet Feb. 11 to set its key rate.
— With assistance by Anand Menon, Adrian Wong, Cecilia Yap, and Ditas B Lopez
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December 22, 2020 at 09:18AM
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Philippines May Keep Interest Rate Low Through 2022, Diokno Says - Bloomberg
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