BSP to refine economic surveillance tools

The Bangko Sentral ng Pilipinas (BSP) is working on further refining their economic surveillance tools to better capture data and enhance policymaking, an official said.

The central bank is shifting from mainly traditional data to more soft data in their monitoring, surveillance, and assessment, BSP Deputy Governor Zeno Ronald R. Abenoja said.

“We’re trying to improve a lot of things at the central bank, including our ability to monitor what’s happening on the ground real time and what it means going forward,” he told reporters on Friday.

“As we improve the surveillance, it helps us communicate, hopefully, what we think is happening on the ground and what we think are important developments that could affect policies moving forward.”

For example, the BSP is studying how to mine more data from the Consumer Expectations Survey and Business Expectations Survey.

“We are reviewing the instruments. We want to improve the ease of filling up or getting more information,” he said, adding that they are also reviewing the content of these surveys.

The BSP is also looking at how to streamline the data without sacrificing the information gathered.

“We are trying to improve our ability to mine more information from these different surveys. We are also trying to improve our understanding of what’s happening in the different regions.”

Mr. Abenoja said the BSP is also working to improve the data capture effectiveness of their surveys, and is considering the use of supplementary surveys.

He cited the US Federal Reserve, which uses strategic surveys on consumer sentiment that have more forward-looking aspects of household expectations.

“We’re thinking of doing those types (of survey) that are more forward-looking to have a sense how households are thinking of reacting or their expectations under different circumstances.”

Policy recommendations to the Monetary Board would be based on more solid and current information, he added.

The BSP is also keen on implementing more early warning exercises to better “anticipate possible scenarios that could influence developments and impact our policy stance.”

It is also studying how to leverage developments in the information technology sector and harness computing power.

FX playbook

Meanwhile, Mr. Abenoja said they are in the process of developing an “FX (foreign exchange) playbook.”

“There are a lot of studies, analysis being done on the relationship between exchange rate and inflation, exchange rate and inflation expectations,” he said.

BSP Governor Eli M. Remolona, Jr. earlier said they are seeking to develop a “playbook” to guide foreign exchange intervention.

“There are asymmetric effects and threshold effects. The impact of FX movements on inflation is not the same in the sense that the significant, sharp depreciation over a short period of time could have big implications on inflation,” Mr. Abenoja said.

“But we may want to smooth out this impact on inflation because sometimes there are swings, there is a deficit and then it suddenly returns to the previous level. But the impact on inflation is already there,” he said.

Mr. Abenoja said there is room for foreign exchange intervention to smooth out its effects.

“The playbook is being reviewed… to ensure there is a development on our analysis of the dynamics of foreign exchange market. We want to preserve our flexible exchange rate regime,” he said.

“But probably we can improve the inflation dynamics by smoothing out some of these temporary effects of exchange rate on inflation, so we’re doing the playbook.” 

Meanwhile, in a separate memorandum, the BSP is advising banks on the revised the Residential Real Estate Price Index (RREPI), which seeks to provide a more comprehensive overview of the sector.

In a memorandum posted on its website, the BSP reminded universal and commercial banks, thrift banks and digital banks to submit their quarterly reports on residential real estate loans and appraised commercial properties in view of the revised index.

“With the transition to the hedonic methodology, the RREPI has been renamed the Residential Property Price Index (RPPI),” it said.

All references to the RREPI shall now refer to RPPI, it added.

“This change aligns the index’s nomenclature with international standards and more accurately reflects its comprehensive coverage of residential property prices on the banking segment of the market.”

The BSP monitors banks’ exposure to the property sector as part of its mandate to maintain financial stability.

The RREPI tracked the average price changes of residential properties across different housing types and locations.

The BSP in a separate notice said the RREPI relied on “simple averages (and) oversimplified the residential property market by assuming homogeneity within the stratum and failing to address outliers.”

“The use of hedonic regression — widely regarded as the gold standard in property price index generation — allows for the observation of how intrinsic characteristics of the residential real estate market independently influence prices,” it added.

The latest first-quarter data were released with the RPPI format. Latest data showed that the RPPI rose by an annual 7.6% in the January-March period, though slower than the 9.8% expansion logged in the fourth quarter. — Luisa Maria Jacinta C. Jocson