BSP Governor Benjamin Diokno (File photo)
MANILA – The Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) maintained anew Thursday the central bank’s key policy rates given the manageable inflation projections for the next two years.
Thus, the overnight reverse repurchase (RRP) rate was still at a record-low 2 percent, the overnight deposit rate was at 1.5 percent, and the overnight lending rate was at 2.5 percent.
In a virtual briefing, BSP Governor Benjamin Diokno said baseline inflation forecasts until next year have increased relative to the board’s projection last December due to higher domestic food inflation and upticks in global oil prices, but figures remained within the government’s 2-4 percent target band.
The latest average inflation projection is 3.7 percent for 2022 while 3.3 percent for 2023. These were previously at 3.4 percent for this year and 3.2 percent for next year.
Diokno cited the recovery of the domestic economy as the government continues to ease movement restrictions and strengthen its vaccination drive against the coronavirus disease 2019 (Covid-19).
But he said the growth outlook is partly hampered by the elevated global commodity prices, geopolitical tensions overseas, and uneven pace of vaccination in other countries.
“Looking ahead, given the stronger signs of recovery in output growth and labor market conditions and improvements in domestic financial markets, the BSP will continue to carefully develop its plans for the eventual normalization of its extraordinary liquidity measures when conditions warrant, in keeping with our price and financial stability mandates,” he added.
Diokno said any adjustment in banks’ reserve requirement ratio (RRR), which have been slashed by as much as 200 basis points in 2020 as part of the central bank’s measures to help lift the domestic economy from the impact of the pandemic, will continue to be dependent on the domestic liquidity conditions and the recovery of credit demand.
He said decisions on this would also depend on inflation and domestic growth outlooks.
“While the RRR adjustments in 2020 have been aimed primarily in ensuring ample liquidity amid the pandemic, continuing improvements in the use of market-based instrument(s) will also allow the BSP to continue to reduce its reliance on the reserve requirement for managing liquidity in the financial system,” Diokno said.
The introduction of the BSP securities, which has been offered through auctions since September 2020, is another way for the central bank to “reach our goal of a single-digit reserve requirement ratio by 2023,” he added. (PNA)
