With few options, BSP keeps rate steady, calls for food imports to ease inflation
MANILA, Philippines — Saying that the Philippines was likely to see higher inflation in the coming months, the central bank on Thursday (Feb. 11) decided to keep its key interest rate unchanged, which starts a “long pause” on monetary easing that Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno had signalled last week.
Diokno said the seven-man Monetary Board called for “urgent and coordinated efforts” with government agencies in implementing non-monetary measures to give Filipino consumers access to “internationally competitively priced food” that would mitigate the impact of supply-side factors on inflation.
At an online press briefing, the country’s top bank regulator said the Monetary Board kept the interest rate on the overnight reverse repurchase facility steady at 2 percent — the current record low that was reached after a series of easing moves to counter the pandemic’s effects on the economy in 2020.
The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent.
“The Monetary Board noted that inflation is likely to remain elevated in the coming months, reflecting the impact of supply constraints on domestic prices of key food commodities such as meat and vegetables as well as the recent uptick in international oil prices,” Diokno said.
“At the same time, the latest baseline projections show inflation returning to within the target range of 2-4 percent over the policy horizon as supply-side influences subside,” he added.
“The Monetary Board also noted that inflation expectations continue to be anchored within the inflation target band,” Diokno said.
The central bank chief said that the balance of risks to the inflation outlook now appears to be broadly balanced around the baseline path in 2021, but is seen to continue leaning toward the downside in 2022.
Tighter supply of meat products owing in part to the African swine fever outbreak in the country could add to upside pressures on inflation, he explained.
However, the ongoing pandemic may continue to pose downside risks to demand and to the inflation outlook.
“While recent indicators of activity and sentiment have shown some improvement, the emergence of new variants of the virus and possible delays in mass vaccination programs continue to temper prospects for economic recovery and growth,” Diokno said.
Diokno explained that the Monetary Board still views the current inflation outlook as being “manageable”, and that the current environment “continues to allow the BSP to maintain an accommodative policy stance and thus complement crucial fiscal policy measures in supporting economic activity and market confidence.”
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