The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, on Thursday kept the overnight borrowing rate at a recordlow of 2 percent, taking into account the expected manageable inflation trajectory in the coming months.
BSP Governor and board chairman Benjamin Diokno said in an online briefing the interest rates on the overnight deposit and lending facilities were also kept unchanged at 1.5 percent and 2.5 percent, respectively.
“Latest inflation forecasts indicate that the average inflation is likely to settle near the upper end of the target range of 2 percent to 4 percent in 2021; the BSP expects that average inflation will ease towards the midpoint of the target range in 2022 and 2023,” Diokno said.
“Price pressures on food commodities have abated with favorable weather conditions and the facilitation of meat imports to augment domestic supply. The Monetary Board emphasizes that the continued implementation of direct non-monetary measures will be crucial in mitigating further supply-side pressures on meat prices and inflation,” he said.
Diokno said the risks to the inflation outlook remained broadly balanced around the baseline projection path. The uptick in international commodity prices amid supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation.
He said downside risks to the inflation outlook continued to emanate from the emergence of new coronavirus variants, which could delay the easing of containment measures and temper prospects for domestic growth.
“The Monetary Board also observed that economic activity has improved in recent weeks, but the overall momentum of the economic recovery remains tentative as the threat of COVID-19 infections continues,” he said.
Diokno said the sustained implementation of targeted fiscal initiatives and the acceleration of the government’s vaccination program should help boost market confidence and recovery of the economy in the coming months.
“The expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings unchanged. The Monetary Board believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction, especially as risk aversion continues to temper credit activity despite ample liquidity in the financial system,” he said.
Deputy Governor Francisco Dakila said in the same briefing the inflation forecasts for 2021 and 2022 were slightly adjusted upwards on higher global crude oil prices and favorable growth outlook.