The country’s finance chief said in light of the prevailing economic conditions and government initiatives, maintaining an unchanged policy rate is deemed necessary while ensuring that the central bank remains prepared to take action if needed.
Finance Secretary Benjamin Diokno said last Friday the Department of Finance (DOF) has voted for a provisional pause on the policy rate hike.
“This decision is influenced by the reduction in price momentum in recent inflation performance and the downward trend in inflation projections,” Diokno said.
“Maintaining the current policy rate is seen as a way to preserve the country’s buffer against external shocks and allow direct measures of the national government to impact inflation dynamics,” he added.
Diokno said forecasts indicate that inflation for 2023 will average at 5.4 percent and then settle at 2.9 percent in 2024 and 3.2 percent in 2025.
He added that inflation is expected to be within the government’s target range in the fourth quarter of 2023, and it may even fall below the lower limit of the target range in the first quarter of 2024 due to negative base effects and anticipated decreases in global oil and non-oil prices.
“The balance of risks to the inflation outlook remains tilted towards the upside due to persistent constraints in the supply of key food items, the potential impact of El Niño on food prices and utility rates, possible second round effects on agricultural prices from higher toll rates, as well as the effects of probable additional adjustments in transportation fares and wages. The central bank remains ready to resume monetary action, if necessary,” Diokno said.
“The decision to maintain the current policy rate is consistent with the Federal Reserve’s decision to keep the federal funds rate target range unchanged, as economic activity continues to expand at a modest pace, unemployment remains low and inflation remains elevated,” he added. – Angela Celis
