Inflation battles continue as new BSP chief aims to reign in price hikes

The new governor of the Bangko Sentral ng Pilipinas (BSP) considers elevated inflation as an immediate challenge and is determined to bring it back to the 2-4% target range by the fourth quarter.

During the Philippine economic briefing in Toronto, Canada, BSP Governor Eli M. Remolona said that the country faced unusual supply shocks in the past year.

“We adhere to an inflation-targeting framework. We focus largely on price stability,” said Mr. Remolona.

He also said that the BSP has a more hawkish approach to taming inflation compared to the US Federal Reserve, which prioritizes stabilizing both inflation and employment.

“The BSP is determined to bring inflation back toward its target range,” he said. “We had an inflation rate as high as 8.7% in the beginning of 2023. The last number is 5.4% (in June). Our models tell us that we will be within the 2-4% target range by the last quarter of this year.”

Although the headline inflation rate cooled to 5.4% in June, marking a 14-month low, it still exceeded the BSP’s 2-4% target range for the 15th consecutive month.

For the first half of the year, inflation settled at 7.2%, surpassing the central bank’s forecast of 5.4%.

Finance Secretary Benjamin E. Diokno expressed confidence in the government’s measures, saying that inflation will return to the target range of 2-4% by the fourth quarter of this year and drop below the lower limit of the target by the first quarter of 2024.

The government will continue its efforts to analyze the demand and supply conditions of key commodities through the Inter-agency Committee on Inflation and Market Outlook.

Apart from managing inflation, the Philippine central bank is also committed to managing climate change risks and achieving sustainable outcomes, according to Mr. Remolona.

“What we’re trying to do is work with climate scientists to develop a taxonomy of bank assets related to climate change,” he said.

He also noted that climate-related financial disclosures are part of the BSP’s sustainable agenda.

“We look at each kind of loan or each kind of asset and what it’s financing, and decide what it’s doing for climate change. Is it bad? Is slowing down climate change? Or is it accelerating our climate change?” Mr. Remolona said.

“We will weigh each type of assets in the books of the banks, and then we will give the bank an overall rating of its role in climate change. And then we will disclose that, and the banks will be asked to disclose those assets. We hope the disclosure alone would do the trick,” he said.

The BSP is collaborating with the Securities and Exchange Commission and the Insurance Commission to develop a Sustainable Finance Taxonomy, as mentioned in its 2022 sustainability report.

The central bank possesses additional tools to encourage banks to mitigate climate change, Mr. Remolona added. — Keisha B. Ta-asan