UNCHANGED POLICY RATES. The Bangko Sentral ng Pilipinas says Thursday (Nov. 16, 2023) that it has maintained its policy rates after an off-cycle 25 basis points rate hike last month. BSP deputy governor Francisco Dakila said the BSP is prepared to resume monetary policy tightening as necessary. (PNA file photo)
MANILA – The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday kept policy rates unchanged as inflation outlook moderated.
BSP Governor Eli Remolona Jr., in a statement read by Deputy Governor Francisco Dakila in a briefing, said the target reverse repurchase (RRP) rate was maintained at 6.50 percent.
"The interest rates on the overnight deposit and lending facilities will also be maintained at 6 percent and 7 percent, respectively," Remolona said.
The risk-adjusted inflation forecast for this year was lowered to 6.1 percent from the previous 6.2 percent on the back of the slower-than-expected headline inflation of 4.9 percent in October and the strengthening of peso.
The 2024 and 2025 risk-adjusted inflation forecast was also downgraded to 4.4 percent from 4.7 percent and 3.4 percent from 3.5 percent, respectively.
The baseline forecast for 2023, meanwhile, was at 6 percent; 3.7 percent for 2024; and 3.2 percent for 2025.
Remolona said supply-side inflation pressures continued to ease due in part to the national government’s non-monetary interventions, as well as seasonal factors.
"Nevertheless, the balance of risks to the inflation outlook still leans significantly toward the upside, notwithstanding the recent improvement in food supply conditions," he said.
Upside risks include the potential impact of higher transport charges, electricity rates and international oil prices, as well as of higher-than-expected minimum wage adjustments in areas outside the National Capital Region.
The weaker-than-expected global recovery and government measures to mitigate the effects of El Niño weather conditions, meanwhile, could reduce the central forecast.
"Given these considerations, the Monetary Board noted that keeping the policy rate steady will allow previous policy interest rate adjustments, including the interest rate increase in October, to continue to work their way through the economy," Remolona said.
He said the projected economic growth rebound in the third quarter supports the view that the country's medium-term growth prospects remain largely intact, even as pent-up demand continues to diminish in the near term.
Remolona assured the public that the BSP would also continue to assess how firms and households are responding to tighter monetary policy conditions.
Looking ahead, Remolona said the Monetary Board continues to deem it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes fully evident and inflation expectations are firmly anchored.
"Guided by incoming data, the BSP remains prepared to resume monetary policy tightening as necessary to steer inflation towards a target-consistent path, in line with its price stability mandate," Remolona said. (PNA)
