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MANILA, Philippines — The policy-making Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) kept the central bank’s key policy rates unchanged on Thursday, citing moderate inflation expectations for the next two years.

As a result, the overnight reverse repurchase (RRP) rate remained at a record low of 2%, the overnight deposit rate was 1.5 percent, and the overnight lending rate was 2.5 percent.

BSP Governor Benjamin Diokno said in a virtual briefing that baseline inflation forecasts for next year have increased from the board’s projection last December due to higher domestic food inflation and increases in global oil prices, but that the figures remained within the government’s 2-4 percent target band.

Inflation is expected to average 3.7 percent in 2022 and 3.3 percent in 2023, according to the most recent projections. Previously, they were set at 3.4 percent for this year and 3.2 percent for the following year.

Diokno underlined the domestic economy’s improvement as the government continues to reduce movement restrictions and enhance its coronavirus disease vaccine campaign in 2019. (Covid-19).

However, he stated that the forecast for development is limited in part by rising global commodity prices, geopolitical uncertainties abroad, and the uneven vaccination rate in other nations.

“Looking ahead, given the stronger signs of recovery in output growth and labor market conditions, as well as improvements in domestic financial markets,” he said, “the BSP will continue to carefully develop plans for the eventual normalization of its extraordinary liquidity measures when conditions warrant, in line with our price and financial stability mandates.”

Any adjustment in banks’ reserve requirement ratios (RRR), which have been slashed by as much as 200 basis points in 2020 as part of the central bank’s measures to help lift the domestic economy out of the impact of the pandemic, will remain dependent on domestic liquidity conditions and credit demand recovery, according to Diokno.

Decisions on this, he said, would be influenced by inflation and domestic economic forecasts.

“While the RRR adjustments in 2020 were primarily aimed at ensuring ample liquidity during the pandemic,” Diokno explained, “continuing improvements in the use of market-based instrument(s) will also allow the BSP to continue to reduce its reliance on the reserve requirement for managing liquidity in the financial system.”

The BSP assets, which have been available through auctions since September 2020, are another means for the central bank to “achieve our aim of a single-digit reserve requirement ratio by 2023,” according to him.

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