THE CENTRAL BANK on Monday reiterated signals of “strong” monetary response to surging inflation when its Monetary Board meets next week, even as its chief said it was too early to tell how much damage from super typhoon Mangkhut, locally known as Ompong, would affect prices of goods.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said its Monetary Board will not hold an off-cycle policy review ahead of its Sept. 27 rate-setting meeting.
“We will follow the regular cycle on the 27th with strong monetary action,” Mr. Espenilla said on the sidelines of a signing ceremony held at the BSP headquarters in Manila.
The policy-setting Monetary Board reviews benchmark interest rates every six weeks.
Mr. Espenilla had committed to “take strong immediate action” in response to the faster-than-expected 6.4% inflation rate recorded in August. That pulled the eight-month average increase in prices to 4.8%, well above the 2-4% target band for 2018.
Market analysts expect another rate hike from the BSP this month, with bets that policy makers will respond with another 50 basis points (bp) to douse inflation expectations and temper sharp peso-dollar swings.
Mr. Espenilla has said inflation has lately been driven largely by supply factors — citing scarcity of cheap rice and elevated world crude oil prices — hinting that fiscal measures have a key role to play in the state’s response.
The BSP chief said on Monday that it was “too early to tell” how much the damage the typhoon, which struck northern Luzon last Saturday, would translate to increased prices especially for crops like rice. “Historically, typhoons cause disruptions in supply but the impact tends to be localized and transitory. So I don’t think it will create a problem on inflation for a longer horizon,” he said. “But for the main inflation problem we’re dealing with right now, several measures have already been announced — non-monetary and monetary measures — so we continue along with those.”
The BSP has said it expects inflation to peak this quarter before easing closer to target towards yearend. The BSP has increased policy interest rates by a cumulative 100 basis points so far this year with this objective in mind.
Also on Monday, the BSP signed an agreement with the Department of Trade and Industry to use the latter’s one-stop Negosyo Centers to link micro, small and medium enterprises (MSMEs) to formal, cheap financing channels. “MSMEs are unable to reach their full potential because of difficulty of credit and financial access,” Mr. Espenilla said, noting that barely a tenth of bank loans are extended to small businesses. — Melissa Luz T. Lopez