New Philippine Central Bank Chief Makes His Priorities Clear

(Bloomberg) -- Benjamin Diokno, the new central bank governor for the Philippines, made his priorities clear in his first public comments as head of the monetary authority: price and economic stability, and ensuring the independence of the institution.

Diokno’s surprise appointment this week jolted financial markets as traders bet he’d be more open to cutting interest rates and tolerant of a weaker peso. In his first press conference as head of Bangko Sentral ng Pilipinas, the 70-year-old governor gave an optimistic outlook for inflation, saying there was room to ease policy, but any move would be “data dependent.”

Read More: Philippine Central Bank Chief Sees Room for Easing as CPI Slows

New Philippine Central Bank Chief Makes His Priorities Clear

Bangko Sentral, which has kept its key rate unchanged at 4.75 percent at its past two meetings, will next decide on interest rates on March 21. It raised borrowing costs by a total of 175 basis points in 2018 as inflation climbed to a nine-year high.

Here are some of his key comments to reporters in Manila on Friday:

On Inflation

“Given the impact of non-monetary measures to relieve food supply bottlenecks including the implementation of the rice tariffication law, the BSP expects inflation to settle within the target band of 3 percent, plus-or-minus 1 percentage point, for 2019 to 2020.”

“With inflation slowing down in recent months, authorities have further opportunity to assess the stance of monetary policy.”

On BSP Independence

“In pursuing policy continuity, let me also assure you that the BSP will sustain its institutional independence, with the Monetary Board acting as a collegial body.”

“Given the decelerating inflation in the Philippines, there’s an opportunity for monetary easing, but as I said, that will be dependent on the data that will be given to us by our technical staff here.”

On Timing of Policy Move

“My favorite economics professor used to say: Two data points do not constitute a trend. We need to be more careful. The important thing is really timing with data. We have to look at the situation globally. Is the global economy really slowing down? Are inflation expectations already down or something? We need to decide on that basis.”

On Reserve Ratio

Diokno toned down earlier comments to hasten a cut in the reserve requirement ratio for banks, saying on Friday any decision will depend on what the data shows and will be made by the Monetary Board, not by him alone.

“As I said, our policy will be determined by clear analysis. It should always be data-driven and evidence-based, and it will be decided upon by the board. I cannot, on my own, decide on the cut on the reserve requirement.”

“I’m an action person. If there’s a decision, I think I want it done as soon as possible. No point postponing. If you have decided, you’re sure that’s the right thing to do, do it as soon as possible. I am known for that.”

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