High growth, stable inflation: BSP policy stance appropriate

Tetangco says the confluence of nimble monetary policy, steadfast fiscal action, and swift government responses sustained the economy on path of high growth and stable inflation.

With the country’s gross domestic product (GDP) again growing above forecasts in the third quarter, Bangko Sentral ng Pilipinas Governor Amando Tetangco said their current policy stance “appears to remain appropriate.”

“GDP at 7.1 percent affirms that we have once again achieved the ideal convergence of high growth and stable inflation. The confluence of nimble monetary policy, steadfast fiscal action, and swift government responses has sustained the economy on this path,” Tetangco said.

The government yesterday announced that the economy grew 7.1 percent in the third quarter from a revised 6 percent in the second quarter.

The level is much higher than the between 5 and 5.5 percent average forecasts set by both local and foreign analysts.

This is also the most that the economy has expanded since 2010’s 7.3 percent.

By expenditure breakdowns, private consumption rose 6.2 percent, government spending rose 12.0 percent, fixed capital formation rose 8.7 percent, total exports rose 6.9 percent and total imports rose 8.3 percent.

Tetangco also stressed that in the near-term their “policy stance appears to remain appropriate.”

“We will continue to be watchful of market conduct and be sensitive to other economic indicators and movements of prices in other real and financial assets,” Tetangco added.

Some say that this means that the policymaking Monetary Board will likely keep steady the key rates of the BSP when it next meets on December 13.

Last October, the Monetary Board decided to reduce the BSP’s key policy interest rates by 25 basis points to 3.50 percent for the overnight borrowing or reverse repurchase (RRP) facility and 5.50 percent for the overnight lending or repurchase (RP) facility. The Monetary Board’s decision is based on its assessment that the inflation environment continues to be benign.

At the same time, the Monetary Board notes that global economic prospects continue to face considerable headwinds.

Given these considerations, the Monetary Board is of the view that monetary easing consistent with a manageable inflation outlook will help buffer domestic demand against ongoing global economic strains.

Going forward, Tetangco said that the “BSP will be careful to calibrate the use of its enhanced policy tool kit to help ensure that domestic aggregate demand price pressures as the economy continues on this high growth path and risks from capital flows are managed as more investors become convinced that the country is a value investment.” –JIMMY CALAPATI, Malaya