July 20, 2019
THE Bangko Sentral ng Pilipinas’ (BSP) monetary policy settings remain “appropriate,” based on economic developments in the last three months, Governor Benjamin Diokno said on Friday.
In a message read by BSP Deputy Governor Francisco Dakila Jr. at the central bank’s 2nd Quarter Inflation Report briefing, Diokno said that given developments in the second quarter, the Bangko Sentral “deemed it appropriate to reduce the policy rates by 25 basis points on May 9.…”
“Subsequently, at its meeting on June 20, the Monetary Board decided that a prudent pause was necessary and appropriate to allow the BSP to observe and assess the impact of its monetary adjustments during the second quarter,” he added.
Diokno announced that headline inflation fell to the midpoint of the government’s 2- to 4-percent target range for the year to 3 percent in the second quarter from 3.8 percent in the first due to improved domestic food supply conditions, which significantly reduced food inflation.
According to the inflation report, the rate of the increase in food prices slowed to 3 percent in April to June after exceeding the upper end of the target of 4 percent for five straight quarters.
The BSP chief said consumer sentiment for the second quarter weakened slightly due to expectations of higher prices of goods and household expenses, while the business outlook on the economy markedly improved during the period.
During the three-month period, average Dubai crude oil prices rose by 6.1 percent from the previous quarter’s level “as a result of tighter global oil supply conditions,” he added.
Diokno also pointed out that, at the same time, the purchasing managers index in May remained above the 50-point expansion threshold at 51.5 index points.
“Economic activity also continued to be supported by growths in domestic liquidity and credit,” he said, noting that domestic liquidity and bank lending grew by 6.4 percent and 11.5 percent, respectively, that month.
“Moreover, strong macroeconomic fundamentals, the sound banking system and firm economic growth prospects continue to support the domestic financial market,” Diokno added.
He also reported that the peso appreciated during the quarter, in pact because of the generally dovish stance of the US Federal Reserve, as well as the credit rating upgrade the country received from S&P Global Ratings.
In the report, the Bangko Sentral said the peso averaged at P52.07:$1 in April to June, appreciating by 0.57 percent from the January-to-March average of P52.37:$1.
“Furthermore, the Philippine banking system remains healthy, as asset quality indicators continue to be positive and capital adequacy ratios remain comfortably above the BSP’s regulatory threshold and international standards,” Diokno said.
However, he said, prospects for global output growth weakened as a result of an easing in global demand from increased trade tensions worldwide.
The central bank governor also said central banks in Asia likewise eased their monetary policy settings to provide monetary stimulus amid ongoing headwinds to growth and employment.
“Several major central banks in advanced economies have likewise signaled the dovish moentary policy stance,” he added.
Credit belongs to : www.manilatimes.net