BSP keeps the interest rate at 2%
MANILA – The Bangko Sentral ng Pilipinas said on Thursday that the Monetary Board decided to keep the interest rate at its all-time high of 2%.
The central bank kept the benchmark lending rate at its current level for a year to support the economic recovery despite the threat of rising inflation.
Although inflation hovered above the government’s target of 2-4 percent, it hit a 4-month low to 4.2 percent in November, the data showed.
The Monetary Council also revised upwards its inflation outlook for 2021 and 2022 on Thursday.
The BSP said its inflation forecast has been raised to 4.4% for 2021, from a previous forecast of 4.3%. For 2022, it has been revised to 3.4% from 3.3%.
At the same time, the inflation forecast for 2023 has been kept at 3.2%.
BSP Governor Benjamin Diokno said earlier that inflation could return to within the target by 2022. BSP maintained the target range of 2-4% until 2024.
“The projected inflation path remains within the target inflation range of 2-4% over the political horizon. Average inflation is expected to stabilize near the midpoint of the target range in 2023. Inflation expectations also continue to be anchored at the target level, “he said.
Diokno said the emergence of the new omicron COVID-19 variant “continues to pose downside risks to the outlook for growth and inflation.”
“Nonetheless, the Monetary Board observed that economic growth now appears to be resting on more solid ground, supported by the government’s accelerated vaccination program and a calibrated relaxation of quarantine protocols,” he added.
The Philippines, which has recorded more than 2.83 million cases of COVID-19, has fully vaccinated more than half of its high-end target of 77.1 million people.
Some central banks around the world have started to tighten their monetary policies to stop inflation. But Diokno said the Philippines’ current policy remains adequate.
The country also has large dollar reserves to cushion the impact of any US Federal Reserve action, the BSP said earlier.
Any Fed action is also built into the expected inflation path, Deputy Governor Francisco Dakila said in Thursday’s briefing.
The US Fed could implement 3 rate hikes in 2022 to fight inflation, Fed Chairman Jerome Powell said on Wednesday.
– with a report from Reuters
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