New BSP chief needs to continue fight vs inflation

The new governor of the Bangko Sentral ng Pilipinas (BSP) should focus on tackling elevated inflation while protecting economic growth, analysts said.

President Ferdinand R. Marcos, Jr. on Friday appointed Monetary Board member Eli M. Remolona, 70, as the new BSP governor and chairman of the policy-setting board.

“We think it was a good decision given his stellar background as well as his being attuned to the market and the economy,” Security Bank Corp. Chief Economist and Assistant Vice-President Robert Dan J. Roces said in a Viber message. 

Mr. Remolona will start his six-year term on July 3. Current BSP Governor Felipe M. Medalla steps down on July 2.

“The beginning of his term will be one of balancing growth along with rate cuts while being cognizant of the risks from external developments,” Mr. Roces said.

The Philippine economy expanded by 6.4% in the first quarter — its slowest growth in two years but still within the government’s 6-7% target.

Meanwhile, inflation cooled for a fourth straight month in May, slowing to 6.1% from 6.6% in April, but remained above the BSP’s 2-4% target range for a 14^th straight month.

“We applaud his appointment. Dr. Remolona brings his wealth of experience to the table. Expecting him to carry on Mr. Medalla’s fight versus inflation,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message. 

China Bank Capital Corp. Managing Director Juan Paolo E. Colet said Mr. Remolona is a “strong choice” for BSP governor, but he would have to calibrate policy to tame inflation and manage foreign exchange stability.

“While there is room for the BSP to hold its key rate steady until the end of the year, it will be mindful of keeping an adequate interest rate differential with the US to prevent unnecessary depreciation of the peso,” Mr. Colet said in a Viber message.

The new BSP chief would also have to balance between prudent regulation and market innovation, he added.

“Rapid developments in technology are opening a lot of opportunities but also bringing a host of risks, so the BSP’s regulatory role is all the more crucial in that kind of dynamic environment,” Mr. Colet said.

He noted markets are also waiting to see how Mr. Remolona would communicate policy, adding the public would benefit from a “clear, candid, and disciplined approach.”

Meanwhile, Mr. Medalla said he is grateful for the chance to serve as BSP governor.

“I am honored to turn over the reins of the institution to my Monetary Board colleague Eli Remolona who is fully capable of leading the central bank in pursuing its mandates of promoting price and financial stability, and a safe and efficient payments and settlements system,” he said in a statement.

During Mr. Medalla’s term, the BSP raised benchmark interest rates by 425 bps from May 2022 to March this year. The Monetary Board has since paused its policy tightening as inflation eased.    

Meanwhile, Finance Secretary Benjamin E. Diokno strongly believes that Mr. Remolona would be able to unwind BSP’s aggressive policy tightening.

“I cannot speak for his pace. But that’s easy. Even before, we have an unwinding strategy,” Mr. Diokno said in mixed English and Filipino.  “Monetary policy is his life. I think he’ll do well. He is advising other central bankers in Asia-Pacific, he understands the nature of the job.”

Mr. Remolona will be the seventh BSP chief since the implementation of the New Central Bank Act in 1993. He joined the Monetary Board in August 2022.

The incoming BSP governor worked at the Federal Reserve Bank of New York for 14 years and at the Bank for International Settlements in Switzerland and Hong Kong for 19 years.

Before moving to the central bank, Mr. Remolona served as an independent director of the Bank of the Philippine Islands (BPI) and chairman of the lenders’ risk management committee.

He was also a finance professor at universities in the United States, Malaysia, and in the Philippines. He holds a doctorate degree in economics from Stanford University, and graduated from V. Mapa High School.

The Bankers Association of the Philippines (BAP) also welcomed the appointment of Mr. Remolona as the new head of the BSP.

“The BAP looks forward to working with incoming Governor Remolona on various initiatives impacting the banking industry and its stakeholders, whether it be in the areas of financial market development, cybersecurity, or sustainability,” BAP President and BPI Chief Executive Officer Jose Teodoro K. Limcaoco said in a statement. — Keisha B. Ta-asan with inputs from Luisa Maria Jacinta C. Jocson