BSP Governor Benjamin Diokno (File photo)
MANILA – Monetary authorities on Thursday kept anew the Bangko Sentral ng Pilipinas’ (BSP) key rates as they continue to see policy space, given the manageable inflation environment and downside risks on the economy.
In a virtual briefing, BSP Governor Benjamin Diokno said the overnight reverse repurchase (RRP) facility is still at a record low of 2 percent, the overnight deposit facility at 1.5 percent, and the overnight lending facility at 2.5 percent.
Diokno, however, said average inflation forecasts for both 2021 and 2022 were increased “owing to the higher-than-anticipated inflation outturn in November.”
“Nevertheless, the projected inflation path remains within the inflation target band of 2 (percent) to 4 percent over the policy horizon. Average inflation is seen to settle close to the midpoint of the target range in 2023. Inflation expectations also continue to be anchored to the target level,” he said.
The BSP’s policy-making Monetary Board (MB) adjusted the central bank’s average inflation forecast for 2021 to 4.4 percent from 4.3 percent previously, and the 2022 figure to 3.4 percent from 3.3 percent.
It, however, maintained the 2023 forecast at 3.2 percent.
Diokno said the upside risks are linked mainly to the potential impact of continuing constraints on the supply of key food items and petitions for transport fare hikes.
“Strong global demand amid lingering supply-chain bottlenecks could also exert further upward pressures on international commodity prices,” he said.
Diokno thus underscored the need to sustain the effective implementation of non-monetary interventions to ensure adequate domestic food supply and mitigate potential supply-side pressures on inflation.
With these factors, he said, the MB “sees enough scope to keep a patient hand on the BSP’s policy levers owing to a manageable inflation environment.”
Diokno said downside risks on the continued recovery of the economy are projected to come from the emergence of new coronavirus disease 2019 (Covid-19) variants, as well as the potential tightening of global financial conditions.
“Hence, preserving ongoing monetary policy support at this juncture shall help sustain the economy’s momentum over the next few quarters,” he said.
Diokno said the central bank affirms its 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 while the higher-than-expected November 2021 inflation rate of 4.2 percent was the primary factor for the upward revision of the average inflation forecasts until next year, this was countered by the drop in global oil prices. (PNA)
