UNCHANGED POLICY RATES. The Bangko Sentral ng Pilipinas (BSP) on Thursday (Dec. 14, 2023) maintained its policy rates at 6.5 percent. BSP Governor Eli Remolona Jr. said risks to inflation still lean toward the upside. (PNA file photo)
MANILA – The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) kept the policy rates unchanged on Thursday.
"After its meeting on monetary policy today, the Monetary Board decided to keep the BSP’s Target Reverse Repurchase (RRP) Rate unchanged at 6.50 percent. Accordingly, the interest rates on the overnight deposit and lending facilities will remain at 6.0 percent and 7.0 percent, respectively," Monetary Board and BSP Governor Eli Remolona Jr. said in a briefing.
Headline inflation further eased to 4.1 percent in November, just slightly higher than the upper end of the government's 2 percent to 4 percent target.
Remolona noted, however, that the balance of risks to the inflation outlook still leans significantly toward the upside.
"Key upside risks are associated with potential pressures emanating from higher transport charges, increased electricity rates, and higher oil prices. Meanwhile, the impact of a relatively weak global recovery, as well as government measures to mitigate the effects of El Niño weather conditions could reduce the central forecast," he said.
Remolona said the BSP would also continue to monitor how firms and households are responding to tighter monetary policy conditions alongside evolving domestic and external economic conditions.
"With the sum of recent information, the Monetary Board continues to see the need to keep monetary policy settings sufficiently tight to allow inflation expectations to settle more firmly within the target range," he said.
Inflation outlook
According to the BSP, the overall outlook for inflation remains largely unchanged.
The latest risk-adjusted inflation forecast for 2023 has been reduced to 6 percent from the previous 6.1 percent.
For 2024, it was also lowered to 4.2 percent from 4.4 percent, while that for 2025 remains at 3.4 percent.
BSP senior assistant governor Iluminada Sicat the latest risk-adjusted forecast already incorporated the impact of El Niño, which is expected to persist until the second quarter of 2024.
"We're expecting improvement (in inflation), I mean return to target path by quarter one 2024 but we'll see some uptick in the second quarter," Sicat said.
"Inflation is likely to settle within the target in quarter one 2024 mainly due to the negative base effects, but could temporarily accelerate above the target from April to July due to the impact of El Niño weather conditions."
Sicat said the BSP projects inflation to return to the target in the third quarter of 2024 and settle near the midpoint of the target in the fourth quarter due to the decline in world oil prices.
Sought to comment on whether the BSP is ending its tightening cycle, she said the BSP "needs some firmer indications that inflation expectations are already anchored firmly within the target range and actual inflation has reverted back within the target path."
"So we must see that there are firm indications towards that trend," she said.
The BSP has so far hiked policy rates by a total of 450 basis points since last year to bring inflation back to the government's target. (PNA)
