Last month's drop in domestic inflation provided the Bangko Sentral ng Pilipinas (BSP) some breathing…
The Bangko Sentral ng Pilipinas (BSP) has maintained its benchmark interest rates for the second time.
The Bangko Sentral ng Pilipinas (BSP) key rates were maintained on Thursday as monetary authorities continue to perceive policy space, given the controlled inflation environment and downside risks to the economy.
Governor Benjamin Diokno of the BSP stated the overnight reverse repurchase (RRP) facility is still at a record low of 2%, the overnight deposit facility is at 1.5 percent, and the overnight loan facility is at 2.5 percent in a virtual briefing.
However, Diokno stated that average inflation predictions for 2021 and 2022 had been raised “because to the higher-than-expected inflation outturn in November.”
“However, throughout the policy horizon, the estimated inflation trend stays within the target band of 2 (percent) to 4%.” In 2023, average inflation is expected to be close to the goal range’s midpoint. “Expectations of inflation remain fixed to the target level,” he added.
The Monetary Board (MB) of the BSP, which sets policy, raised the central bank’s average inflation projection for 2021 to 4.4 percent from 4.3 percent earlier and lowered the forecast for 2022 to 3.4 percent from 3.3 percent.
However, the prediction for 2023 was kept at 3.2 percent.
The positive risks, according to Diokno, are primarily related to the possible impact of continued supply limitations on critical food products and requests for transportation fare hikes.
“Strong global demand combined with lingering supply-chain bottlenecks might push international commodity prices even higher,” he warned.
As a result, Diokno emphasized the importance of maintaining the successful implementation of non-monetary actions in order to ensure adequate domestic food supply and moderate potential supply-side inflationary pressures.
The MB “sees enough scope to keep a patient hand on the BSP’s policy levers owing to a controlled inflation environment” because of these considerations, he said.
The introduction of novel coronavirus disease 2019 (Covid-19) subtypes, as well as the potential tightening of global financial conditions, are expected to pose adverse risks to the economy’s sustained recovery, according to Diokno.
“As a result, maintaining continuing monetary policy assistance at this juncture will assist in maintaining the economy’s momentum over the next few quarters,” he said.
Diokno stated that the central bank “reaffirms” its support for the economy while “keeping an eye” on future inflation threats.
“In accordance with its pricing and financial stability objectives, the BSP remains ready to respond to anticipated second-round consequences emanating from supply-side pressures,” he added.
While the higher-than-expected November 2021 inflation rate of 4.2 percent was the primary reason for the upward revision of average inflation forecasts until next year, this was countered by the drop in global oil prices, according to BSP Deputy Governor Francisco Dakila Jr. during the same briefing.