MANILA — The Philippine central bank kept its monetary policy settings steady on Thursday to support the country’s pandemic-hit economy, saying inflation is expected to remain elevated but manageable in the coming months.
The Bangko Sentral ng Pilipinas (BSP) kept its overnight reverse repurchase facility rate at a record low of 2.0%, in line with market expectations.
The rates on the overnight deposit and lending facilities were likewise kept at 1.5% and 2.5%, respectively.
The risks to the inflation outlook appear to be “broadly balanced”, BSP Governor Benjamin Diokno said.
“Tighter supply of meat products owing in part to the African Swine Fever outbreak in the country could lend further upside pressures on inflation,” he said.
“However, the ongoing pandemic may continue to pose downside risks to demand and to the inflation outlook.”
The BSP now forecasts average inflation this year to be at the upper-end of its 2%-4% target range, from 3.2% previously.
But it lowered its inflation forecast for next year to 2.7% from 2.9%, well within the same target range.
“The manageable inflation outlook continues to allow the BSP to maintain an accommodative policy stance,” Diokno said.
Inflation hit a two-year high of 4.2% in January due to meat and vegetable supply constraints.
Some economists have ruled out further policy easing this year, while others have raised the possibility of a rate hike.
The BSP slashed rates by a cumulative 200 basis points last year, at a time when the economy saw its worst contraction on record due to the pandemic.
Despite an unprecedented policy easing by the BSP that included massive buying of government securities, banks have remained risk-averse in extending loans.
Bank lending fell for the first time in more than 14 years in December, reflecting weak consumer and business activity.
Reporting by Neil Jerome Morales, Enrico Dela Cruz, and Karen Lema, Editing by Martin Petty and Hugh Lawson; Reuters
Support Independent Journalism
Your contribution helps support TFT News’ mission to deliver in-depth, unbiased, and independent journalism for everyone. Every contribution, regardless of the amount, is vital to our cause.