THE NEW Bangko Sentral ng Pilipinas (BSP) chief sees inflation returning to the 2-4% target range before the year ends.
“Inflation has finally started to come down, and if our models are right, we should be back in our target range even by the end of this year,” BSP Governor Eli M. Remolona said during the turnover ceremony and the BSP’s 30th anniversary event at its head office in Manila on Monday.
Mr. Remolona takes over the central bank after his predecessor Felipe M. Medalla led an aggressive monetary tightening campaign to curb inflation.
From May 2022 to March this year, the BSP has raised interest rates by 425 basis points to combat inflation. This brought the policy rate to 6.25%, the highest in nearly 16 years.
Mr. Medalla, who served 11 years as a Monetary Board member and one year as BSP governor, said the past year “was a year like no other” as the central bank faced unprecedented challenges and fought record-high inflation.
“We acted decisively. We also sold foreign exchange as necessary… Combined with non-monetary measures, our actions helped reduce second-round effects and re-anchor inflationary expectations,” he said.
Mr. Medalla noted that the Philippines may see 18 straight months of inflation being above the 2-4% target from April 2022 to September 2023. This is three months longer than the longest record of 15 months in 2008 to 2009.
“Unless there are new shocks, we should see inflation below 4% before the end of this year,” he said.
The BSP sees full-year inflation averaging at 5.4%, before further slowing down to 2.9% in 2024.
Also, Mr. Remolona said the country’s banking system remains strong.
“Capital and liquidity have been more than adequate. That’s why, in recovering from the pandemic, our banks have been a source of strength, unlike in previous crises, when they were a source of weakness,” he said.
Based on central bank data, the combined net profit of Philippine banks rose by 45.6% to P96.62 billion as of end-March from P66.34 billion in the same period in 2022.
“The plumbing of our system — our payments and settlement system — has increasingly become digitalized and efficient. We are delivering greater and greater access to financial services for our people,” Mr. Remolona said.
The BSP is aiming to have 50% of retail payments done digitally and 70% of adult Filipinos become part of the formal financial system by 2023.
The central bank reported that the share of online payments in the total volume of retail transactions in the country stood at 42.1% in 2022, while the country’s banked population was at 56% of all adults in 2021. — KBT