IMF calls for balanced monetary policy

The International Monetary Fund (IMF) has called for a cautious and adaptive approach to monetary policy by the Bangko Sentral ng Pilipinas (BSP), as the Philippines faces increasing risks from supply-side shocks and inflationary pressures.

- By KEISHA TA-ASAN

In its staff report following the IMF's Article IV consultation, the multilateral lender said monetary policy in the Philippines may need to be adjusted to more frequent and severe supply-side shocks moving forward.

"The frequency, severity and persistence of adverse supply shocks may increase in the future, for instance due to climate change and rising geo-economic fragmentation," the IMF said.

"The BSP will need to be careful in 'looking through' them to ensure second-round effects do not lead to a de-anchoring of inflation expectations," it added.

The IMF said that inflation dynamics in the Philippines have increasingly been shaped by supply factors rather than demand. This trend reflects the country's high reliance on imported fuel and food, limited application of price controls, and vulnerability to adverse climate events.

Therefore, the BSP must strike a balance between addressing immediate inflation risks and maintaining long-term price stability, the IMF said.