COLEGIO DE SAN GABRIEL ARCANGEL OF CALOOCAN

Phase 10 Package 6 Lot 1-5 Bagong Silang Caloocan City

MONETARY POLICY AND CENTRAL BANKING

Submitted by:

ESTEBAN, MA. CHRISTINE

Submitted to:

SIR JOHN REY DORMENTES

November 29, 2021

 COLEGIO DE SAN GABRIEL ARCANGEL OF CALOOCAN
Phase 10 Package 6 Lot 1-5 Bagong Silang Caloocan City

1. What important takeaways you got from the article?

- The BSP also reduced reserve requirement ratios to minimize any potential liquidity issues (RRRs).
The action was also meant to encourage banks to keep lending to both the retail and commercial sectors,
especially in light of the recent bank lockdowns, which began in mid-March. In addition, the BSP
allowed for alternative methods of meeting reserve requirements in order to boost bank lending to
businesses hit by severe economic downturns. Prior to the pandemic, banks and NBQBs only retained
essential reserves in their demand deposit accounts (DDAs) with the BSP as non-remunerated deposits.
2. Do you think that COVID-19 played an important role for the changes in the BSP’s situation? Why?
- Yes, because the COVID-19 outbreak is a global health crisis. Authorities worked immediately to
develop containment and mitigation measures to avoid overburdening the health system. However, at
least in the short term, these policies resulted in a sharp decline in economic activity. Early on, the
Bangko Sentral ng Pilipinas (BSP) realized the financial implications of the health situation. The BSP,
like other central banks, acted fast in the face of the outbreak, putting in place measures to keep the
economy afloat and avoid financial market disruptions. The BSP has been cautious in its use of its
powers, knowing that its tools have the capacity to solve short- and medium-term economic difficulties
while also considering the long-term implications.
3. What steps did the BSP took to at least lessen the impact of the pandemic to its financial performance?
Explain.
- To date, the BSP's policy measures have been consistent with the central goal of maintaining price
stability in order to support balanced and long-term economic and employment growth. Even with
considerable monetary easing, inflation is expected to remain within target for the policy horizon in the
absence of unexpected shocks. As a result, the BSP will continue to fine-tune its various regulatory
relief and supervisory measures in order to ensure financial intermediation while avoiding systemic
risks, as illustrated in the previous section. Central bank policy reactions to the epidemic, as Restoy
(2020) points out, indicate how "macroprudential tools do matter, for both financial and economic
stability."