The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, on Thursday kept the overnight borrowing rate at a record low of 2.25 percent amid the prevailing manageable inflation rate despite the lingering pandemic.
BSP Governor Benjamin Diokno said in a virtual press briefing Thursday following the conclusion of the board meeting that the interest rates on the overnight deposit and lending facilities were also kept at 1.75 percent and 2.75 percent, respectively.
“The Monetary Board’s decision is based on the assessment that prevailing monetary policy settings remain appropriate. Latest baseline inflation forecasts show a slightly lower path within the government’s 2-4 percent target range. This reflects the lower-than-expected inflation in August, the moderation in global crude oil prices and the appreciation of the peso,” Diokno said.
He said the balance of risks to the inflation outlook also continued to lean toward the downside from 2020 until 2022, owing largely to the risk of potential disruptions to domestic and global economic activity amid the ongoing pandemic.
Meanwhile, inflation expectations remain firmly anchored within the inflation target band.
“Given these considerations, the Monetary Board is of the view that a continued pause will allow prior measures by the BSP to further work their way through the economy. The gradual easing of restrictions, along with sustained efforts by the government to protect human health and livelihood, should also help lift market sentiment and aid the recovery of the economy in succeeding months,” he said.
Deputy Governor Francisco Dakila said in the same briefing that the inflation forecasts for 2020 until 2022 were revised. Inflation forecast was revised to 2.3 percent for 2020 from the previous estimate of 2.6 percent; 2.8 percent from 3 percent for 2021; and 3 percent from 3.1 percent for 2022.
Dakila said the revisions stemmed from the lower global oil prices and the lower-than-expected inflation rate of 2.4 percent for August.
The BSP reduced the policy rate by 175 basis points this year to unleash more liquidity into the financial system and boost economic activity amid the health crisis.
It also cut the reserve requirement ratios of banks by 200 basis points to 12 percent. The 200-bps cut in RRR translates to around P180 billion to P200 billion freed up to the financial system.