The Philippines: BSP keeps policy settings unchanged

  • ​At its meeting on monetary policy today, the Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase facility at 2.0%. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5% and 2.5%, respectively.
  • Latest inflation forecasts have shifted marginally higher, reflecting the recent increase in global commodity prices and the depreciation of the peso. Average inflation is seen to settle slightly above the upper end of the target band of 2-4 percent in 2021.
  • With the continued and timely implementation of non-monetary initiatives and reforms to mitigate supply-side pressures on meat and other food prices, inflation is projected to ease towards the midpoint of the target range in 2022 and 2023.
  • At the same time, the risks to the inflation outlook remain broadly balanced over the policy horizon. The uptick in international commodity prices due to improving global demand amid lingering supply-chain bottlenecks could lend upside pressures to inflation.
  • However, downside risks to the inflation outlook are also seen from the spread of more contagious coronavirus variants. In particular, delays in the lifting of containment measures could further dampen prospects for global growth and domestic demand.
  • On balance, the Monetary Board is of the view that the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings unchanged.
  • The Monetary Board remains keen on sustaining monetary policy support for as long as necessary in order for the momentum of economic recovery to gain more traction as well as to help boost domestic demand and market confidence, especially as risk aversion continues to temper credit activity.
  • Going forward, the BSP will remain vigilant against any emerging risks to the outlook for inflation and growth. The BSP stands ready to adjust its policy settings as needed to ensure price and financial stability conducive to a sustainable economic recovery.

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