Central banks urged to remain a stabilizing force amid uncertainty in global economy — BIS

CENTRAL BANKS must remain a “stabilizing force” amid uncertainties in the global economy, the Bank for International Settlements (BIS) said.

- By Luisa Maria Jacinta C. Jocson Senior Reporter

“The most important task, particularly in these highly uncertain times, is for central banks to be a stabilizing force and maintain or, in some cases, rebuild trust in monetary policymaking,” BIS Deputy Head of the Monetary and Economic Department Frank Smets told BusinessWorld in a virtual interview.

This kind of trust creates positive dynamics, he added, which helps stabilize inflation expectations and maintain price stability.

“What this means for actual actions of central banks will be different across countries,” Mr. Smets said.

“For countries like the Philippines or countries in East Asia that are on the receiving end of the US tariffs, the rise in tariffs is more likely to be a negative demand shock.”

Markets have been rattled these past few months amid the United States’ flip-flopping tariff policies.

US President Donald J. Trump has set a 19% tariff on Philippine goods, which will take effect starting Aug. 7.

Countries like the Philippines could see falling demand for exports, which could lead to disinflationary pressures, particularly from lower commodity prices, Mr. Smets said.

“In those countries, the room for easing monetary policy is probably greater. It’s really a differentiated picture depending on the country.”

The Bangko Sentral ng Pilipinas (BSP) has said the impact of the US tariffs on the Philippines will be “modest” as the country is not a trading economy.

The central bank is currently in the midst of an easing cycle, so far lowering interest rates by a total of 125 basis points (bps) since August last year.