MANILA – Monetary authorities kept the Bangko Sentral ng Pilipinas’ (BSP) key policy rates steady on Thursday after noting the need for sustained policy support for the economy as it continues its recovery.
To date, the BSP’s overnight reverse repurchase (RRP) rate remains at a record-low 2 percent, the overnight lending rate is at 2.5 percent, and the overnight deposit rate is at 1.5 percent.
In a briefing streamed through its Facebook page, BSP Governor Benjamin Diokno said the central bank’s policy-making Monetary Board (MB) has cited the solid growth traction of the economy due in part to the continued easing of mobility restrictions which improves sentiments, and the gains in the government’s vaccination program.
He, however, said risks of delays in the lifting of movement restrictions and the emergence of more virulent coronavirus disease 2019 variants dampen prospects for growth in both the domestic and global economy.
Diokno said risks to the continued recovery of the economy lessen inflationary pressures.
“On balance, the sum of new data suggests that there remains scope to hold monetary policy settings steady amid a manageable inflation environment. The Monetary Board maintains that keeping a patient hand on the BSP’s policy levers, along with appropriate fiscal and health interventions, will keep the economic recovery more sustainable over the next few quarters,” he added.
Diokno said the central bank will continue to prioritize providing policy support for the economy while “keeping an eye on the potential risks to future inflation.”
“The BSP stands ready to respond to potential second-round effects arising from supply-side pressures in line with its price and financial stability objectives,” he added.
During the same briefing, BSP Deputy Governor Francisco Dakila Jr. said the MB slashed the 2021 average inflation forecast from 4.4 percent to 4.3 percent following the deceleration of the inflation rate last September and October.
The Philippine Statistics Authority has reported a slower inflation rate last September to 4.8 percent from the 4.9 percent in the previous month, which is the highest since January 2019.
This further improved last October when the inflation print further decelerated to 4.6 percent.
The average inflation in the first 10 months this year stood at 4.5 percent, above the government’s 2 percent to 4-percent target band.
The Board kept the BSP’s average inflation projection for 2022 at 3.3 percent and the 2023 forecast at 3.2 percent.
Dakila said the latest average inflation projections for the three-year period took into account developments in global crude oil prices, and the sustained recovery of the domestic economy.
He added the MB continues to note that the elevated inflation rate in the country remains driven by supply-side factors, thus this is best addressed by non-monetary measures.
Dakila, however, said the balance of risks for 2022 is now “slightly on the upside” due to non-oil factors, weather, and risks to the food supply.
He said jeepney fare hike petitions are also an upside risk to the 2022 inflation.
But Dakila believes that “the probability of that (fare increase) happening is on the low side.” (PNA)
