As expected, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) kept policy rates steady for the fourth consecutive meeting, but said that the current inflation environment “has shifted slightly higher.”
BSP Governor Eli Remolona Jr. said the Monetary Board at its meeting on Monday decided to retain the BSP’s target reverse repurchase rate at 6.50%.
The interest rates on the overnight deposit and lending facilities will also remain at 6% and 7%, respectively.
To recall, the March inflation rate settled at 3.7% or higher than February’s 3.4%. However, the March 2024 inflation figure is much lower than the 7.6% of the same month last year.
The risk-adjusted inflation forecast for 2024 has risen to 4% from 3.9% in the previous meeting.
For 2025, the risk-adjusted inflation forecast is unchanged at 3.5%.
“The risks to the inflation outlook continue to lean toward the upside. Possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and global oil prices. Potential minimum wage adjustments could also give rise to second-round effects,” Remolona said.
BSP Senior Assistant Governor Iluminada Sicat said the BSP’s latest forecast shows that there may be an uptick in inflation in the second quarter.
However, Sicat said inflation will go back to within the target range by the third or fourth quarter of the year.
“But nonetheless, we still anticipate inflation outlook to be within target over the 12-month period, (un)til end of this year,” she said.
While upside risks to inflation have raised inflation expectations, these expectations have remained broadly anchored, she added.
Remolona, meanwhile, said the latest demand indicators suggest that domestic growth prospects remain largely intact over the medium term, even as overall activity continues to gradually respond to tighter financial conditions.
“Given these considerations, the Monetary Board deems it appropriate to maintain the BSP’s tight monetary policy settings. The BSP also continues to support the national government’s policies and programs to address supply-side pressures on the prices of key food commodities,” he said.
Remolona said the BSP remains ready to adjust its monetary policy settings as necessary.
The next meeting of the policy rate meeting of the Monetary Board is on May 16 and June 27.
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