Monetary Board keeps policy rates

MANILA – The Monetary Board (MB) has remained on guard as it kept key policy rates despite expecting inflation to ease by the second semester of the year.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said Thursday the MB decided to retain the overnight reverse repurchase (RRP) facility interest rate at 6.5 percent, while overnight deposit and lending facilities were kept at 6 and 7 percent, respectively.

Remolona said the MB anticipates price pressures to soften starting the second half of 2024 as an effect of Executive Order 62 that lowers tariff for imported rice and Administrative Order 20 that eases the importation process for agricultural products.

“Inflation is moving closer to the midpoint of the 2 to 4 percent target range. The risk-adjusted inflation forecasts have eased to 3.1 percent for both 2024 and 2025 from 3.8 percent and from 3.7 percent, respectively. Based on the BSP’s latest survey of market forecasters, inflation expectations remain well-anchored,” he said.

However, the central bank chief said higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation.

He added uncertainties in the global market call for some caution against potential spillovers, including those in the financial markets.

“On balance, the Monetary Board deems it appropriate to hold monetary policy settings steady at this time,” Remolona said.

Aside from the “well-anchored” inflation, the BSP chief said the prospects of gross domestic product (GDP) growth remain in line with the medium-term trends due to favorable labor market conditions and strong net exports.

“Looking ahead, the BSP will ensure that monetary policy settings remain in line with its primary mandate to safeguard price stability conducive to sustainable economic growth,” Remolona said. (PNA)