New BSP chief hits ground running

MANILA, Philippines — Bangko Sentral ng Pilipinas Governor Eli Remolona immediately hit the ground running and vowed continuity as the country continues to recover from the impact of the pandemic.

During the turnover ceremony, Remolona thanked his predecessor, Felipe Medalla, whom he described as a “great mentor and a longtime friend.”

“His resolute leadership during trying times allowed the BSP to find solid ground for our country’s post-pandemic recovery. And on this ground, we can continue to build,” Remolona said.

The seventh BSP governor since the establishment of the new central bank 30 years ago via Republic Act 7653 or The New Central Bank Act of 1993 vowed to pursue the gains in the country’s fight against high inflation.

“Together we must build on the progress we have already made. Inflation has finally started to come down and if our models are right we should be back in our target range even by the end of this year,” Remolona said.

Inflation has cooled to a 12-month low of 6.1 percent in May from 6.6 percent in April, but the 7.5-percent average in the first five months remained above the BSP’s two- to four-percent target range.

Easing inflation and the robust gross domestic product (GDP) growth allowed the central bank to extend its prudent pause as it kept interest rates untouched anew last June 22.

The BSP emerged as the most aggressive central bank in the region after it raised key policy rates by a cumulative 425 basis points since May last year to fight inflation and stabilize the local currency amid the hawkish and aggressive rate hikes by the US Federal Reserve.

The newly minted BSP chief said   the country’s banking system has remained strong and well-capitalized.

“Capital and liquidity have been more than adequate,” he said.

According to Remolona, Philippine banks have been a source of strength in the recovery from the COVID pandemic compared to previous crises where the industry was a source of weakness.

Remolona also vowed to pursue the BSP’s digitalization journey as the central bank aims to shift half of total retail payments in terms to volume to electronic channels by 2023 under its Digital Payments Transformation Roadmap.

The level has increased to 42.1 percent in 2022 from 30.3 percent in 2021 and from only one percent in 2013.

Remolona also urged BSP officials and employees to work even harder.

For his part, Medalla said in his farewell address that the BSP was able to preserve price stability and was able to build on solid foundations during his one-year term as central bank governor.

“We had to act decisively. And we did. During my term as Governor, the BSP raised the policy rates by a total of 350 bps, on top of the 75 bps already taken before I became governor,” he said.

Likewise, Medalla said the BSP acted decisively by selling foreign exchange as necessary to actively intervene in the market and smoothen the volatility of the peso that hit an all-time low of 59 to $1 in October last year, but has appreciated to 55.2 to $1 as of June 30.

“Our more stable exchange rate helps us avoid excessive depreciation that may dislodge inflation expectations and add to inflationary pressures,” Medalla added.