BSP MAINTAINS STEADY COURSE WITH UNCHANGED POLICY RATES

MANILA — In its latest announcement, the Bangko Sentral ng Pilipinas (BSP) stood firm on its decision to maintain the policy rates, keeping the Target Reverse Repurchase (RRP) Rate steady at 6.50 percent.

BSP Governor Eli Remolona Jr., addressing concerns, highlighted that risks to inflation still linger on the upside.

Inflation Landscape

Headline inflation, registering at 4.1 percent in November, showed a marginal decrease, aligning closely with the upper limit of the government’s 2 percent to 4 percent target. Governor Remolona underscored the persistent risks associated with potential increases in transport charges, electricity rates, and oil prices.

Forward Strategy

Despite the ease in headline inflation, Governor Remolona emphasized the necessity of maintaining a vigilant stance, especially with potential external and domestic economic shifts. The BSP remains committed to closely monitoring responses from businesses and households amid evolving monetary policy conditions.

Inflation Outlook

While the overall inflation outlook remains stable, the BSP has adjusted its risk-adjusted inflation forecast for 2023 to 6 percent, slightly lower than the previous projection of 6.1 percent. Projections for 2024 and 2025 have also been revised, reflecting the BSP’s anticipation of the impact of El Niño persisting until the second quarter of 2024.

BSP’s Approach

Senior Assistant Governor Iluminada Sicat acknowledged the BSP’s expectations for a return to the inflation target by the first quarter of 2024. She emphasized that a temporary acceleration above the target might occur from April to July due to the influence of El Niño. The BSP projects a gradual return to the target range by the third quarter of 2024, aligning with the decline in global oil prices.

Looking Ahead

In response to inquiries about the possible end of the tightening cycle, Sicat stated that the BSP awaits firmer indications that inflation expectations are firmly anchored within the target range and that actual inflation has reverted to the target path. With a total of 450 basis points in policy rate hikes since the previous year, the BSP remains committed to aligning inflation with the government’s target.

(ai/mnm)