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UPDATE 2-Philippine c.bank will continue to support growth until recovery is underway

By on July 15, 2021 0

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MANILA, July 15 (Reuters) – The monetary policy of the Philippine central bank will remain favorable for the economy until the recovery is “firmly underway,” its governor said on Thursday, while assuring markets that it would clearly communicate its exit strategy from the ease policy.

While the withdrawal of the Federal Reserve’s stimulus measures could put pressure on emerging central banks to follow suit, the decision of the Bangko Sentral ng Pilipinas (BSP) to reverse the rate cuts will depend on the outlook. domestic inflation, Governor Benjamin Diokno said.

Inflation is expected to remain manageable and this would allow the central bank to continue providing monetary incentives to the real sector, Diokno said at a press conference.

PASB would continue to be “data dependent in policymaking,” Diokno said, adding that “this prudent practice will help us avoid the premature withdrawal of political support”.

The BSP kept interest rates at an all-time high of 2.0% for a fifth consecutive meeting on June 24, and economists expect rates to stay at that level to ensure the economy rebounds after the impact of blockages caused by the pandemic.

The Philippines is battling one of the worst and oldest COVID-19 epidemics in Asia. It lowered its economic growth targets for this year and the following year after a sharper-than-expected contraction in gross domestic product in the first quarter.

It has gradually relaxed the COVID-19 brakes to encourage business activity and allow for greater mobility, but how quickly it can fully reopen depends on its vaccination rollout.

As of Tuesday, 3.89 million people, or 3.5% of the country’s 110 million inhabitants, had been fully vaccinated.

President Rodrigo Duterte on Thursday extended coronavirus-related restrictions on economic activities and the movement of people in the capital region and neighboring provinces until the end of July. Some provinces and cities in the central and southern Philippines have been subject to more flexible restrictions.

With more than 1.49 million infections and 26,314 deaths, the Philippines has the second highest number of COVID-19 cases and deaths in Southeast Asia, after Indonesia.

Reporting by Neil Jerome Morales Writing by Karen Lema Editing by Ed Davies, Martin Petty