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Philippines: BSP keeps rates at all-time lows
MANILA, Philippines — In a widely expected move, the Bangko Sentral ng Pilipinas (BSP) yesterday left interest rates unchanged at their all-time lows, but said it remains vigilant against risks to the outlook for inflation and growth.
In a virtual press conference, BSP Governor Benjamin Diokno said the central bank’s policy-setting Monetary Board kept the interest rate on overnight reverse repurchase facility at two percent, on overnight deposit facility at 1.5 percent, and overnight lending facility at 2.5 percent.
“On balance, 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,” Diokno said.
He said while the Monetary Board has observed an improvement in economic activity in recent weeks, the overall momentum of the recovery remains tentative as the threat of COVID-19 infections continues.
“Nevertheless, the sustained implementation of targeted fiscal initiatives as well as the acceleration of the government’s vaccination program should help boost market confidence and recovery of the economy in the coming months,” Diokno said.
Likewise, Diokno noted that risks to inflation outlook remain broadly balanced, as price pressures on food commodities have abated with favorable weather conditions and the facilitation of meat imports to augment domestic supply.
The BSP chief reiterated that the continued implementation of direct non-monetary measures is crucial in mitigating further supply-side pressures on meat prices and inflation.
“The uptick in international commodity prices amid supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation. However, downside risks to the inflation outlook continue to emanate from the emergence of new coronavirus variants, which could delay the easing of containment measures and temper prospects for domestic growth,” Diokno said.
BSP Deputy Governor Francisco Dakila Jr. said the Monetary Board raised anew its inflation forecast to four percent this year and three percent next year.
Inflation averaged 4.4 percent from January to May, exceeding the BSP’s two to four percent target. It peaked at 4.7 percent in February before steadying to 4.5 percent in March, April and May.
Diokno said the BSP affirms its support to the economy for as long as necessary to ensure its strong and sustainable recovery.
“The BSP will also remain vigilant against any emerging risks to the outlook for inflation and growth and will adjust its policy settings as needed to safeguard its price and financial stability objectives,” Diokno said.
ING Bank senior economist Nicholas Mapa said the BSP is seen providing policy support to the economic recovery as momentum is still weighed down by a relatively high incidence of COVID-19 cases.
“With price pressures fading and inflation set to slide back within target in the coming months, we expect BSP to extend its pause for the balance of the year with a possible rate hike by the middle of next year,” Mapa said.
Source: https://www.philstar.com/business/2021/06/25/2107866/bsp-keeps-rates-all-time-lows