Medalla’s battles

I imagined La Serenissima or Venice, the Floating City but minus the gondoliers and their gondolas, when Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla talked about how the BSP compound in Manila became “a small island surrounded by water” not too long ago. Perhaps it was one of those rainy days of August.

He was talking about climate change and its chaotic impact on all of us. The indefatigable Assistant Governor Edna Villa or EV, got stuck in the compound, says Gov. Medalla, because of rising floodwaters.

It must have been the same night when, a short distance from the building, somewhere in Malate, a bunch of drunks and dreamers also could not leave a pub because Manila was submerged.

It’s climate chaos all over and yet, this is just one of the clear effects of climate change on us. There’s no one way to measure it. We only need to remember Super Typhoon Haiyan; the crazy weather we’ve been experiencing in recent years; all that increasing liquefaction; heavy rains in summer and our summers that are hotter than ever.

Which is why it’s a welcome move when the country’s central bank chief talks about climate change, urging banks to continue pricing the negative impact of climate change on their risks.

One cannot overemphasize this unfolding climate chaos.

“We are telling the banks: include climate change in your calculation of risks. I used to think this was not important until EV told me she was not able to leave the BSP and she had to wait there for a few hours because the BSP became a little island surrounded by water,” says Gov. Medalla during the economic forum organized by the Economic Journalists Association of the Philippines, together with San Miguel Corp.

He also reiterated climate change-related disclosures among banks and other local firms in order to help the government move forward as it leads the fight against global warming.

As I said, this is a step in the right direction. Central bankers across the globe have already been adding climate change to their worries. Christine Lagarde has been warning about droughts, famines, rising sea levels, etc.

Inflation

But Gov. Medalla is facing several other huge battles on many fronts. Climate change is just one. There’s also scorching inflation, consumer prices, the foreign exchange rate, etc. etc.

It’s certainly one of the most challenging times to be the country’s chief monetary official; in fact an ex-central bank governor even says something like it’s a good time to be a BSP governor because to be able to steer the country through today’s headwinds would be a big service to the public.

The funny and pragmatic Gov. Medalla seems up for the challenge. He already hit the ground running, surprising the market with that off-cycle 75 basis points rate hike.

During the EJAP forum, he said the BSP is not ruling out further tightening. The BSP raised rates by 50 bps on Thursday.

“I already said that – not zero, not 75 (basis points). So it’s probably more than a coin toss, but I will not say which side of the coin is heavier,” Medalla said.

After the back-to-back 25-basis-point rate hikes last May 19 and June 23, the BSP delivered a huge 75-basis-point increase during a surprise off-cycle meeting last July 14 to temper mounting risks and manage spillovers from other countries that could potentially disanchor inflation expectations. (Philippine STAR, Aug. 18).

Calling the shots

Against this backdrop, Gov. Medalla, indeed, is in for some big battles. It’s fitting of course that the BSP sits in what used to be a fortification during the Spanish colonial period.

The Spaniards used Fort San Antonio Abad as a little fortress and later on, it became a gunpowder storage facility.

Today, there are no more guns or gunpowder for war stored in the compound, but the country faces different kinds of wars – against inflation, climate change, unscrupulous bankers, etc.

The BSP remains the country’s defensive wall against these problems. It has in its power a suite of monetary tools – all at the ready. It just depends on the sitting governor to call the shots.

It’s good that Gov. Medalla, a longtime Monetary Board member, is prepared for his battles.

Room 501

He even made sure that only the good energy flows into the widely-talked about Room 501, the Office of the Governor.

During a recent dinner, we talked about endless tales surrounding the room; of how the most important office in the BSP also seems to be the most bizarre. Its past occupants saw their stress levels skyrocket. Some blame the room itself; the pragmatic ones, however, would look beyond the urban legends and the Old Wives’ Tales. It’s really the rigors of the job, they say. In any case, Gov. Medalla and his lovely wife and lucky charm Cynthia “Pinky” Medalla, had the room blessed, warding off whatever there is, so that it disappears into the ether. For good.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com