Preferring to give support to the country’s fledgling economy given manageable inflation, the Monetary Board yesterday decided to maintain the key rates of the Bangko Sentral ng Pilipinas for the 10th consecutive session.
BSP’s overnight reverse repurchase facility at 2.0 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.
Benjamin Diokno, BSP governor and Monetary Board chief, said the Board “deems it prudent to maintain the BSP’s accommodative policy stance given a manageable inflation environment and emerging uncertainty surrounding domestic and global growth prospects.”
“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,” Diokno said.
The Board said latest baseline forecasts for 2022 and 2023 show inflation could average within the 2 to 4 percent target range.
“However, the inflation projections have slightly increased from the previous monetary policy meeting, reflecting the impact of higher domestic food inflation and global oil prices.
Inflation expectations have likewise risen marginally but continue to be anchored within the target band,” Diokno said.
He added the risks to the inflation outlook continue to lean slightly towards the upside for 2022 but remain broadly balanced for 2023.
“Upside risks are linked mainly to the continued shortage in domestic pork and fish supply and the possible impact of higher oil prices on transport fares. The implementation of non-monetary measures to ensure adequate supply of key food commodities must be sustained in order to mitigate supply-side pressures on inflation,” Diokno said.
“Increased volatility in international oil prices warrants close monitoring and appropriate interventions when necessary in order to arrest potential second-round effects,” Diokno added.
Diokno said they also observed that the domestic economic recovery has continued to gain traction on the back of the government’s ongoing vaccination program and the easing of mobility restrictions.
“However, elevated global commodity prices, heightened geopolitical tensions, and the uneven pace of vaccinations across countries could dampen the outlook for global economic recovery,” Diokno said.
Nicholas Mapa, ING Bank Philippines senior economist, said the “trigger point for a potential rate reversal would have to be linked to a solid economic recovery coupled with depreciation pressure on the peso.”
“BSP Governor Diokno retained his dovish stance in 2022, signaling he would prefer to extend support to the fledgling economic recovery. With inflation expected to stay within target in the near term, BSP has room to keep policy rates untouched at this meeting,” Mapa said.
