The local unit of Dutch financial giant ING Bank expects the Bangko Sentral ng Pilipinas to be more data dependent going forward to see if there is a need to tweak or not its policy stance amid the benign inflation environment and the expected acceleration of economic growth.
ING Bank Manila senior economist Nicholas Mapa in a report Friday said given that BSP was under an inflation targeting regime, it would naturally weight forward-looking data more heavily, such as the BSP’s inflation forecast, which points to benign inflation all the way to 2021.
“Given that the price objective appears safeguarded into the medium term, we expect Doctor Ben [BSP Governor Benjamin Diokno] to adjust the pacemaker further as the economy chases a higher growth target in 2020 and beyond,” Mapa said.
“From time to time, the doctor will also be monitoring the patient’s blood level to determine the proper timing for further transfusions, should they become necessary. The Doctor remains data dependent and not date dependent as he looks to nurse the once sluggish patient back to good health,” Mapa said.
ING Bank earlier likened the BSP to playing the role of doctor to a sluggish patient. “We had noted that the proper remedy should be rolled out to address specific symptoms and the need to refrain from misdiagnosis.”
It said infusions of liquidity, achieved through RRR reductions, were likened to a blood infusion while adjustments to the economy’s pacemaker were tagged as a cut to the RRP.
“Since then the erstwhile sluggish patient has improved after successive rounds of blood transfusion (RRR cuts) and adjustments to the pacemaker to get the heart to quicken its beat,” it said.
Inflation in October further dipped to a 42-month low of 0.8 percent from 0.9 percent a month ago, tempered mainly by base effects and slower increases in the prices of food and oil.
The October print was also significantly slower compared to the peak of 6.7 percent in the same month last year. This brought the average in the first 10 months to 2.6 percent, way below the midpoint of the target range of 2 percent to 4 percent this year.