PR
At its meeting on monetary policy today, the Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase facility at 2.0 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.
The Monetary Board noted that inflation is likely to remain elevated in the coming months, reflecting the impact of supply constraints on domestic prices of key food commodities such as meat and vegetables as well as the recent uptick in international oil prices. At the same time, the latest baseline projections show inflation returning to within the target range of 2-4 percent over the policy horizon as supply-side influences subside. The Monetary Board also noted that inflation expectations continue to be anchored within the inflation target band.
The balance of risks to the inflation outlook now appears to be broadly balanced around the baseline path in 2021 but is seen to continue leaning toward the downside in 2022. Tighter supply of meat products owing in part to the African Swine Fever outbreak in the country could lend further upside pressures on inflation. However, the ongoing pandemic may continue to pose downside risks to demand and to the inflation outlook. While recent indicators of activity and sentiment have shown some improvement, the emergence of new variants of the virus and possible delays in mass vaccination programs continue to temper prospects for economic recovery and growth.
On balance, the Monetary Board is of the view that the manageable inflation outlook continues to allow the BSP to maintain an accommodative policy stance and thus complement crucial fiscal policy measures in supporting economic activity and market confidence. The Monetary Board likewise reiterates its support for urgent and coordinated efforts with government agencies in implementing non-monetary interventions to enable all Filipinos access to internationally competitively priced food and thereby mitigate the impact of supply-side factors on inflation.
Looking ahead, the BSP remains firm in its intent to take appropriate measures to ensure that the monetary policy stance continues to support the recovery of the economy, consistent with its price and financial stability mandate.
