The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday kept the overnight borrowing rate steady at 6.5 percent for the third time amid the slowdown in inflation.
“In consideration of the prevailing risks, the Monetary Board deems it appropriate to keep the BSP’s monetary policy settings unchanged in the near term amid the improvement in inflation conditions,” it said in a statement.
Data from the Philippine Statistics Authority showed that inflation rate moderated to 2.8 percent in January 2024, within the government’s target range.
The BSP said the Monetary Board also retained the overnight deposit and lending facilities at 6.0 percent and 7 percent, respectively, as the outlook for inflation was broadly unchanged.
“The latest risk-adjusted inflation forecast for 2024 eased to 3.9 percent from 4.2 percent in the previous meeting in December,” the BSP said.
It said that for 2025, the risk-adjusted inflation forecast is relatively steady at 3.5 percent. The BSP’s projection for 2024 and 2025 is also within the government’s target of 2 percent to 4 percent
“Equally important, the BSP’s latest survey of external forecasters shows inflation expectations to be more firmly anchored, with mean forecasts remaining within the target range for both 2024 and 2025,” the BSP said.
BSP Government Eli Remolona Jr. said in January “a rate cut is possible within the year, but first semester is too soon.”
Meanwhile, the BSP said the risks to the inflation outlook had receded, but remained tilted toward the upside.
“The upside risks to the inflation forecasts are linked mainly to higher transport charges, increased electricity rates, higher oil and domestic food prices, and the additional impact on food prices of a strong El Niño episode,” the BSP said.
It said the implementation of government measures to mitigate the impact of El Niño weather condition is the primary downside risk to the outlook.
“Given the salience of rice prices, the recent agreement with Vietnam to secure rice supply over the next five years is encouraging,” it said. “Moreover, the efforts to increase productivity in the rice sector, including the distribution of drought-resistant seeds, are a step in the right direction.”
The BSP said the sustained expansion in economic output in the fourth quarter of 2023 reaffirmed its view that the country’s growth momentum remains intact over the medium term.
The country’s gross domestic product expanded by 5.6 percent in the fourth quarter of 2023.
“However, recent indicators also suggest that economic activity could moderate in the near term as the full impact of the BSP’s prior monetary policy tightening continues to manifest,” the BSP said.