Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the Monetary Board policy meeting in November will be more crucial than the September 23 meeting with “major updates” on BSP forecasts and assumptions.

“We will also be looking closely at the revised second quarter 2021 and preliminary third quarter 2021 GDP (gross domestic product) data which are due to come out in time for the November 18 meeting,” said Diokno.

“This means we will be having a major update of our inflation forecast to reflect these and other crucial data points similar to what we did with (the) GDP data released last month,” he added.

Some economists and analysts are predicting that the September 23 Monetary Board policy meeting, the BSP’s sixth policy meeting, could be pivotal. There are commentaries that BSP could either raise or lower the current two percent overnight reverse repurchase rate this month.

However, Diokno is more than hinting that it is the November Monetary Board policy meeting that might be more decisive. “(A) major forecast update (will) form part of the policy discussion in November,” he said.

Before the November 18 policy meeting, the Philippine Statistics Authority (PSA) will be releasing the revised second quarter GDP and preliminary third quarter GDP data and other national accounts on November 9.

According to Diokno, the BSP “typically looks beyond the calendar year and focuses instead on the outlook for inflation and growth over the entire monetary policy horizon of two years” and they look at all available data and latest forecasts.

“We would like to reiterate that any monetary policy decision will always remain contingent on the outlook for inflation and impact on economic growth. That is, each policy decision will be based on all the available information to the monetary authorities at the time of its decision. If the outlook changes in a material way, the monetary authorities stand prepared to adjust its policy stance as appropriate,” said Diokno.

There was a crucial adjustment to GDP target for 2021 after the PSA announced the second quarter GDP growth of 11.8 percent last August 10.

On the same day, the inter-agency Development Budget Coordination Committee revised lower its growth assumption to just 4-5 percent for this year from its previous projection of 6-7 percent, citing the return of the strictest lockdown since August 6 to contain the rapid spread of a new COVID-19 Delta variant.

In a press chat last Thursday, Diokno said the the path to recovery remains uncertain amid the spread of the more transmissible variants of COVID-19.

“The Monetary Board has observed that the reimposition of lockdown measures in March-April and now in August could ultimately dampen overall growth in 2021.

However, these are necessary interventions aimed at safeguarding public health and carefully calibrated to prevent deeper negative effects on the economy,” he said.

Diokno again said that the BSP has “ample monetary policy space” and that the “current accommodative policy settings represent appropriate stimulus to demand and should be allowed to continue to work their way through the economy to bolster the recovery in private consumption and investment.”

The BSP has kept the policy rate low at a flat two percent – the lowest RRP rate on record – since November 2020. Last year which was the first year of the pandemic, the BSP cut the benchmark rate by 200 basis points.

The BSP’s latest inflation forecast is 4.1 percent for 2021 and 3.1 percent for 2022 and 2023. As of end-July, the inflation has averaged at 4.4 percent, above the two-four percent BSP target.

There are only three of a total eight Monetary Board policy meetings on the calendar for 2021: September 23; November 18; and the last one will be on December 16.

Source: Manila Bulletin (