BSP Governor Benjamin Diokno
MANILA – Philippine monetary officials on Thursday paused the cuts in the central bank’s key rates after noting that inflation is expected to remain within target and domestic and global growth remains weak because of the pandemic.
Thus, the overnight reverse repurchase (RRP) rate is still at 2.25 percent, the overnight lending rate is at 2.75 percent, and the overnight deposit rate is at 1.75 percent.
In a briefing held over the central bank’s Facebook page, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said while average inflation forecasts have been hiked, the figures remain within the government’s 2 to 4-percent inflation target band until 2022.
He said the balance of risks on the inflation outlook leans on the downside given the economic impact of the pandemic on both the global and domestic activity, partly due to resurgence of infections in several countries.
He said BSP’s policy making-Monetary Board (MB) has noted early signs of economic recovery in the country after movement restrictions have been eased and liquidity conditions remain ample.
He said the Board considers the current policy stance to be appropriate and decided to pause, after cutting the key rates by 175 basis points since the start of the year, to assess the impact of its earlier decisions and to allow the policy measures to work its way into the economy.
“Going forward, the BSP remains committed to deploying its full range of instruments as needed in fulfilment of its mandate to promote non-inflationary and sustainable growth over the medium term,” he added.
During the same briefing, BSP Deputy Governor Francisco Dakila Jr. said the inflation forecast for this year has been increased from 2.3 percent during the MB meeting last July 25 to 2.6 percent.
For next year, the figure was raised from 2.6 percent to 3.0 percent while the 2022 figure was adjusted from 3.0 percent to 3.1 percent.
Dakila traced these changes to upticks in the June and July inflation rate to 2.5 percent and 2.7 percent from 2.1 percent in May.
“These factors were partly offset by the sharper contraction of GDP (gross domestic product) in the second quarter and also the continued appreciation of the peso,” he said.
GDP in the first three months this year was revised from -0.2 percent to -0.7 percent, and the second-quarter figure registered a deeper contraction of 16.5 percent.
Meanwhile, Dakila said the MB discounted another cut in banks’ reserve requirement ratio (RRR), after reducing universal and commercial banks (U/KBs) RRR by 200 basis points last April.
“Liquidity conditions have become much more ample,” he said, citing that auctions on the various BSP facilities are generally oversubscribed.
Dakila said these factors indicate there is no need for another RRR cut this time.
“Any further adjustments will be made by the Board as needed,” he added. (PNA)
