Policy stance still in order –– Diokno

April 29, 2019

Bangko Sentral Governor Benjamin Diokno on Friday maintained that the central bank's policy stance remains appropriate and risks to inflation remain even this 2019.

In his speech during the First Quarter 2019 inflation report briefing at the BSP, Diokno said domestic inflation rate is easing and growth dynamics remains firm.

These are seen to counter the impact of a weaker global growth outlook and the rising global crude oil prices.

Diokno noted that while several major central banks indicated more accommodative stance as a result of the slower global economic activities their counterparts from developing economies and emerging markets "have been stirred by challenging external conditions amid trade tensions and tither global financial conditions."

In the last quarter of 2018, the domestic economy expanded, as measured by gross domestic product, by 6.3 percent, higher than the 6-percent growth in the previous quarter but weaker than year-ago's 6.6 percent.

Diokno, however, said that growth remains strong, driven primarily by government spending and private consumption.

"Domestic demand continues to support overall growth, contributing 5.4 percentage points to GDP growth," he said.

"In the near term, recent prevalent demand indicators continue to point to overall firm domestic growth prospects," he said, noting the positive outlooks of both the consumers and businessmen.

Inflation further decelerated last March to 3.3 percent from month-ago's 3.8 percent, bringing the first quarter average to 3.8 percent, slower than the 5.9 percent average in the previous quarter.

The BSP chief said that in terms of monetary conditions, domestic liquidity continues to keep pace with the economy's requirements and bank lending shows sustained improvement of the economy.

He said the domestic financial system "continues to be supported by firm macroeconomic fundamentals, sound banking system, and robust economic growth prospects that reinforce investor sentiment."

"Furthermore, the Philippine banking system remains healthy, with positive asset quality indicators and capital adequacy ratios comfortably above international norms," he said.

"The BSP continues to gauge the impact of its monetary policy responses on domestic economic conditions to ensure that inflation remains on track toward the government's target of 2 to 4 percent and that inflation expectations remain anchored," he added.