Bangko Sentral ng Pilipinas Governor Eli Remolona said Monday he will continue the priorities that bore fruit under the leadership of Felipe Medalla and work harder to do better during his term.
Remolona underscored during the turnover ceremony two points in his speech: pagpapatuloy and pagpapabuti (continuation and improvement), saying Medalla’s “resolute leadership during trying times” allowed the BSP to find solid ground for the country’s post-pandemic recovery.
“And on this ground we can continue to build… Together we must build on the progress we have already made. Inflation has finally started to come down as Gov. Philip explained. And if our models are right, we should be back in our target range even by the end of this year,” Remolona said.
He said the banking system remained strong and their capital and liquidity are 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. 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,” he said.
Remolona said everybody should work harder. “I know we have what it takes to do even better—especially if we work together.”
Medalla said the BSP survived 2022, a year full of extreme challenges highlighted by elevated inflation, higher interest rates, persistent COVID-19 pandemic and the spiraling impact of the continuing geopolitical crisis between Russia and Ukraine.
Medalla said the regulator managed to ensure the uninterrupted supply of money across the country, kept the banking system strong and stable, made the financial system more inclusive and battled record-high inflation.
“It was a year like no other. We encountered unprecedented challenges over which the BSP has little control. Of course, we call them supply shocks. Supply chain disruptions, here and overseas, triggered price hikes in basic commodities, transport and other services,” he said.
“We had to act decisively. And we did. During my term as governor, the BSP raised the policy rates by a total of 350 basis points, on top of the 75 bps already taken before I became governor,” Medalla said.
He said combined with non-monetary measures, the BSP’s actions helped reduce second-round effects and re-anchor inflationary expectations. The BSP already brought inflation to a target-consistent path of 2 percent to 4 percent.
“Unless there are new shocks, we should see inflation below 4.0 percent before the end of this year. This is something to look forward to and, of course, to pray for, that there will be no more large shocks,” Medalla said.
Inflation reached a peak of 8.7 percent in January 2023, but slowed in the succeeding months to 8.6 percent in February, 7.6 percent in March, 6.6 percent in April and 6.1 percent in May.
The BSP said last week inflation in June likely eased further to as low as 5.3 percent on lower prices of meat, fruits and liquefied petroleum gas.
Medalla said the more stable exchange rate helped the peso avoid excessive depreciation that might dislodge inflation expectations and add to inflationary pressures.
The peso, after depreciating to a record low of 59 against the US dollar in October 2022, has since appreciated and closed on June 30 at 55.2 against the greenback.
