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Monetary authorities held the key policy rates of the Bangko Sentral ng Pilipinas (BSP) steady on Thursday, citing the need for sustained policy support for the economy as it continues to recover.

To date, the BSP’s overnight reverse repurchase (RRP) rate is a record-low 2%, the overnight lending rate is 2.5%, and the overnight deposit rate is 1.5%.

BSP Governor Benjamin Diokno said in a briefing streamed on its Facebook page that the central bank’s policy-making Monetary Board (MB) has cited the economy’s solid growth traction, thanks in part to the continued easing of mobility restrictions, which improves sentiments, and gains in the government’s vaccination program.

However, he believes that the risks of delays in lifting movement restrictions and the emergence of more virulent coronavirus disease 2019 variants dampen prospects for growth in both the domestic and global economies.

According to Diokno, risks to the economy’s continued recovery reduce inflationary pressures.

“On balance, the new data suggests that there is still room to hold monetary policy settings steady in the face of manageable inflation.” “The Monetary Board believes that keeping a patient hand on the BSP’s policy levers, along with appropriate fiscal and health interventions, will keep the economic recovery more sustainable in the coming quarters,” he added.

Diokno stated that the central bank will continue to prioritize economic policy support while “keeping an eye on potential risks to future inflation.”

“In accordance with its price and financial stability objectives, the BSP stands ready to respond to potential second-round effects arising from supply-side pressures,” he added.

During the same press conference, BSP Deputy Governor Francisco Dakila Jr. stated that the MB reduced the 2021 average inflation forecast from 4.4 percent to 4.3 percent due to the slowing of the inflation rate in September and October.

The Philippine Statistics Authority reported a slower inflation rate of 4.8 percent in September, down from 4.9 percent the previous month, which was the highest since January 2019.

This was further improved in October, when the inflation rate fell to 4.6 percent.

Inflation averaged 4.5 percent in the first ten months of this year, well above the government’s target range of 2 to 4 percent.

The Board maintained the BSP’s average inflation forecast for 2022 at 3.3 percent, and the forecast for 2023 at 3.2 percent.

Dakila stated that the most recent average inflation projections for the three-year period took into account changes in global crude oil prices as well as the domestic economy’s sustained recovery.

He added that the MB continues to observe that the country’s elevated inflation rate is still driven by supply-side factors, and that this is best addressed through non-monetary measures.

Dakila, on the other hand, stated that the balance of risks for 2022 is now “slightly on the upside” due to non-oil factors, weather, and food supply risks.

He added that jeepney fare hike petitions are an additional risk to 2022 inflation.

However, Dakila believes that “the likelihood of that (fare increase) occurring is on the low side.”

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