MANILA – Philippine monetary officials on Thursday kept the Bangko Sentral ng Pilipinas (BSP) key rates steady, a decision that leans on the commitment to help buoy the domestic economy from the impact of the pandemic.
Thus, the BSP’s overnight reverse repurchase (RRP) rate is still at a record-low 2 percent, the overnight lending rate at 2.5 percent, and the overnight deposit rate at 1.5 percent.
“Looking ahead, the BSP affirms its support to the economy for as long as necessary to ensure its strong and sustainable recovery. The BSP will also remain vigilant against any emerging risks to the outlook for inflation and growth and will adjust its policy settings as needed to safeguard its price and financial stability objectives,” BSP Governor Benjamin Diokno said in a briefing streamed through the central bank’s Facebook Page.
Central bank’s key rates have been slashed by a total of 200 basis points last year as part of the BSP’s contribution to help lift the domestic economy.
By cutting key rates, the BSP aims to encourage people and businesses to borrow and for banks to lend to ensure that domestic economic activities remain robust.
Diokno said the outlook on domestic inflation rate also provides the central bank leeway to keep key rates steady, with average prints for this year until 2023 seen to remain within the government’s 2-4 percent target band.
He said price pressures from food commodities have subsided due to favorable weather conditions and increase in supplies, such as pork, which have been impacted by the African swine fever.
Pork supply has been augmented by increased importation, he said.
“The Monetary Board emphasizes that the continued implementation of direct non-monetary measures will be crucial in mitigating further supply-side pressures on meat prices and inflation,” he added.
While upside pressure on inflation is present due to the rise in commodity prices in the international market because of supply-chain bottlenecks and the recovery of demand, Diokno said these are being countered by the emergence of new coronavirus disease 2019 (Covid-19) variants “which could delay the easing of containment measures and temper prospects for domestic growth.”
He further said that while domestic economic activity continues to get better momentum, a recovery remains weak because of the threats of virus infections.
“On balance, the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings unchanged. The Monetary Board believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction, especially as risk aversion continues to temper credit activity despite ample liquidity in the financial system,” he added. (PNA)
