The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, maintained the overnight borrowing rate at a record-low 2 percent on Thursday, the board’s last policy meeting for the year.
BSP Governor Benjamin Diokno, who is also the board chairman, said in an online briefing the interest rates on the overnight deposit and lending facilities were also kept at 1.5 percent and 2.5 percent, respectively.
“The Monetary Board’s decision was based on its assessment that the inflation environment remains benign. The latest baseline forecasts have risen slightly due to the sharp increase in global crude oil prices and the higher-than-expected food inflation in November,” Diokno said.
“However, since the rise in food prices is transitory, it is expected that the future inflation path will remain firmly within the government’s 2 to 4 percent target over the policy horizon,” he said.
He said the balance of risks to the inflation outlook also leaned toward the downside from 2020 to 2022 because of potential disruptions to domestic and global economic activity amid the pandemic.
He said inflation expectations remained broadly consistent with the inflation target.
“The Monetary Board noted that the resurgence of COVID-19 cases globally has tempered economic activity with the re-imposition of preventive measures in recent weeks. However, optimism over the delivery of vaccines has lifted market confidence, supporting improved prospects for global growth,” Diokno said.
He said that on the domestic front, the board observed early indications of improved mobility and sentiment. He said while recent natural calamities could pose strong headwinds to growth, the further easing of quarantine measures should help facilitate the recovery of the economy in the coming months.
BSP Deputy Governor Francisco Dakila said the inflation forecasts for 2020 and 2021 were revised upwards. From the 2.4 percent assumption during the Nov. 19 meeting, inflation is now seen to average 2.6 percent this year.
For 2021, inflation forecast was raised to 3.2 percent from the previous estimate of 2.7 percent. The inflation forecast of 2.9 percent was unchanged for 2022.
“The main factors considered in the revisions were the increase in global crude oil prices and supply side pressures on food,” Dakila said.
Dakila said despite the revisions, the baseline forecasts remained comfortably within the inflation band of 2 percent to 4 percent.
