22 Jul 2021 | News & Feature

BI Policy: The onus is on fiscal policy

  • BI maintains policy rate at 3.50%, as economic recovery is put on ice amid the surge of Delta variant.
  • BI sees a slower GDP outlook at 3.5 – 4.3%, and as such views next year to be a more appropriate timeline for gradual exit from accommodative policy.
  • External risks that could derail such policy are muted for now, thanks to (1) lower global yields amid Delta wave; (2) lower oil prices after OPEC deal; and (3) the government’s ability to control inflation.
  • While system-wide liquidity remains ample, there is apparently a liquidity squeeze in certain sectors and amongst low-income households.
  • Given heightened risk perception and low financial inclusion, the more appropriate way of addressing this liquidity squeeze is through fiscal rather than monetary policy.