MANILA – Philippine monetary officials on Thursday kept the Bangko Sentral ng Pilipinas’ (BSP) key policy rates, citing the risks from elevated inflation rate due to supply-side factors and hikes in the international oil prices.
BSP’s key rates were reduced by a total of 200 basis points in 2020 as the central bank’s share in helping buoy the domestic economy from the impact of the pandemic.
To date, the BSP’s overnight reverse repurchase (RRP) facility rate is at record-low 2 percent, the overnight lending rate at 2.5 percent, and the overnight deposit rate at 1.5 percent.
In a briefing aired over the central bank’s Facebook page, BSP Governor Benjamin Diokno said latest inflation forecast shows that rate of price increases may exceed the government’s 2-4 percent target band this year due to the impact of supply constraints on food items like meat on account of the African swine fever (ASF), and the increases in oil prices in the international market.
Inflation has been on the rise since the last quarter of 2020 and monthly figures exceeded the target band since January this year when it hit 4.2 percent.
It further rose to 4.7 percent last February, bringing the two-month average to 4.5 percent.
Amid these upticks, Diokno said inflation is seen to decelerate and stay within the target band next year.
He said while global economic activity has improved, which provides upside risks to domestic inflation rate, the pandemic is expected as a downside risk because of its dampening effect on domestic demand.
With these factors, Diokno said BSP’s policy-making Monetary Board “is of the view that prevailing monetary policy settings remain appropriate to support the government’s broader efforts to facilitate the recovery of the economy.”
However, he said the Board “emphasizes that the timely implementation of non-monetary interventions is crucial in mitigating the impact of supply-side pressures on inflation and thereby preventing them from spilling over as second-round effects.” (PNA)