Monetary policy not enough to shield PHL from trade shocks

MONETARY POLICY may not be enough to cushion the economy from the potential impact of trade shocks, the Bangko Sentral ng Pilipinas (BSP) said.

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"Today, unprecedented policy shocks are fueling a befuddling kind of uncertainty. Monetary policy alone cannot fully shield the economy from the repercussions of these shocks," BSP Deputy Governor Zeno Ronald R. Abenoja said at a forum hosted by the Philippine Institute for Development Studies (PIDS) and central bank on Monday.

"Broader, coordinated strategies would indeed help."

Quoting BSP Governor Eli M. Remolona, Jr., Mr. Abenoja said that trade shocks are "more damaging" than supply shocks.

"Unlike your usual supply shocks, which tend to be transitory, trade shocks have deeper, more persistent effects," he said.

Last month, US President Donald J. Trump slapped reciprocal tariffs on nearly all its trading partners. However, he suspended the implementation of the higher tariffs until July but kept the baseline 10% tariff.

"In particular, trade shocks affect the capital stock of developing economies. Left unchecked, they can slow growth trajectories and erode decades of hard-won progress," Mr. Abenoja said.

Mr. Remolona earlier said that central banks have been concerned about the global trade uncertainties, prompting the need to update models and frameworks to better account for these risks.