The Bangko Sentral ng Pilipinas kept key interest rates unchanged at its policy meeting on Thursday, noting inflation risks remain tilted toward the upside. Even so, the central bank dangled the possibility of policy easing as early as August this year.
BSP Gov. Eli Remolona said the BSP’s target reverse repurchase rate was maintained at 6.50 percent, while interest rates on the overnight deposit and lending facilities were also left unchanged at 6.0 percent and 7.0 percent, respectively.
“The Monetary Board deems it appropriate to ensure sufficiently tight monetary policy settings until inflation settles firmly within the target range. A restrictive policy stance will also help keep inflation expectations anchored amid a possible buildup in upside risks to future inflation,” Remolona said.
The BSP has aggressively tightened monetary policy since the first half of 2022—raising key interest rates by a total 4.5 percentage points until its decision to pause in October—to tame inflation due to sharp increases in commodity prices.
After the release last week of April inflation numbers that settled at 3.8 percent, still below the upper edge of the BSP’s 2-4 percent target range, Remolona said Monetary Board members have turned a bit dovish.
“We are actually somewhat less hawkish than before, which means we could ease, cut rates in Q3 or Q4 this year. So, the second half of this year…possibly by August this year,” Remolona told a news briefing called to discuss the BSP’s latest monetary policy decision. The only policy meeting set in the third quarter is in August.
The primary mandate of the central bank is maintain price stability.
The latest inflation forecast of the central bank suggests the consumer price index will settle at the upper end of the 2 percent to 4 percent target range. Indeed, the risk-adjusted inflation forecast of the BSP for 2024 eased to 3.8 percent from 4.0 percent in the previous meeting while the forecast for 2025 was raised to 3.7 percent from 3.5 percent previously.
Higher transport charges, food prices, electricity rates, and global oil prices are the main risks to the inflation outlook.
The Monetary Board reiterated its support for the National Government’s non-monetary measures to address persistent supply-side pressures on food prices and to prevent further second-round effects.
Based on the latest gross domestic product data, the expected path for domestic output growth over the medium term remains largely intact, even as recent indicators point to continued moderation under tight financial conditions, the central bank said.
