MANILA – The Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) kept the central bank’s key rates steady Thursday as expected given the elevated inflation rate.
To date, the BSP’s overnight reverse repurchase (RRP) facility is at a record-low 2 percent, the overnight lending rate at 2.5 percent, and the overnight deposit rate at 1.5 percent.
In a virtual briefing aired over the central bank’s Facebook page Thursday, BSP Governor Benjamin Diokno said supply-side factors on key food commodities like meat and vegetables and upticks in the international price of oil are expected to drive inflation this year.
Amidst these factors, Diokno said the rate of price increases is seen to decelerate once supply constraints are addressed.
“The Monetary Board also noted that inflation expectations continue to be anchored within the inflation target band,” he said, referring to the 2-4 percent target range until 2024.
While the impact of the African swine fever is seen to post upside risk to inflation, Diokno said the weaker demand on account of the pandemic is expected to counter this.
“While recent indicators of activity and sentiment have shown some improvement, the emergence of new variants of the virus and possible delays in mass vaccination programs continue to temper prospects for economic recovery and growth,” he said.
The accommodative policy stance of the BSP banks on monetary authorities’ manageable inflation outlook, he said, adding this view supports the government’s fiscal policy measures and market confidence.
“The Monetary Board likewise reiterates its support for urgent and coordinated efforts with government agencies in implementing non-monetary interventions to enable all Filipinos access to internationally competitively priced food and thereby mitigate the impact of supply-side factors on inflation,” Diokno said.
During the same briefing, BSP Deputy Governor Francisco Dakila Jr. said the MB increased the central bank’s average inflation projection for this year to 4 percent from 3.2 percent previously but slashed the 2022 forecast to 2.7 percent from 2.9 percent.
“Balance of risks to the outlook remains broadly balanced this year and on the downside for 2022,” he said, noting inflation rate is expected to go back to within-target levels “towards the latter part of the year” with the help of interventions to boost the supply of agricultural and meat products.
The inflation rate last January surpassed the government’s target band after it accelerated to 4.2 percent, the fourth consecutive month of a faster rate due to supply-side factors. (PNA)
