BSP maintains its key interest rates at the same level as before
The central bank maintained its benchmark rates unchanged on Thursday, citing an increase in inflation projections from 2021 to 2023 as a result of higher global commodity prices, a lower peso, and negative risks to economic growth owing to the epidemic.
The overnight reverse repurchase (RRP) rate of the Bangko Sentral ng Pilipinas (BSP) stayed at a record-low 2%, the overnight repurchase (RP) rate at 2.5 percent, and the overnight deposit rate at 1.5 percent.
“The Monetary Board remains committed to maintaining monetary policy support for as long as necessary to help boost domestic demand and market confidence, especially as risk aversion continues to temper credit activity,” BSP Governor Benjamin Diokno said in a briefing streamed live on the central bank’s Facebook page.
The average inflation rate predicted for this year has been raised from 4% to 4.1 percent, while the number for 2022-2023 has been raised from 3% to 3.1 percent.
The average inflation estimate for this year is greater above the three-year goal range of 2 percent to 4%.
“Continued and timely execution of non-monetary measures and reforms to reduce supply-side pressures on meat and other food prices,” Diokno added, is anticipated to address the high inflation rate.
“Inflation expectations remain firmly aligned with the baseline projection path,” Diokno added, despite the increase in inflation predictions.
According to him, the emergence of more infectious coronavirus disease 2019 (Covid-19) types poses a danger to inflation.
“Delays in the removal of containment measures, in particular, may impair global economic and local demand prospects,” he said.
One of the negative reasons for the economic recovery, according to Diokno, is the adoption of quarantine measures.
Targeted fiscal and health measures, he added, would be “crucial in protecting public health and avoiding deeper negative impacts on the Philippine economy,” particularly the acceleration of the government’s immunization campaign.
“Going ahead, the BSP will be on the lookout for any new threats to the inflation and economic outlook. The BSP is ready to modify its policy settings as necessary to maintain price and financial stability, which is necessary for a long-term economic recovery,” he said.