The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, on Thursday cut the overnight borrowing rate by 25 basis points to 3.75 percent on benign inflation environment.
BSP Governor and MB Chairman Benjamin Diokno said the interest rates on overnight lending and deposit facilities were also reduced by 25 bps to 4.25 percent and 3.25 percent, respectively.
“Latest baseline forecasts indicate a broadly steady path of inflation for 2020 and 2021, with average inflation remaining within the target range of 2 to 4 percent,” Diokno said.
Diokno said the risks to the inflation outlook continued to tilt slightly toward the upside in 2020 and toward the downside in 2021.
“Upside risks to inflation over the near term emanate mainly from potential upward pressures on food prices owing in part to the African swine fever outbreak and tighter international supply of rice,” he said.
“Moreover, there continues to be the burden on the economy posed by the ongoing Taal Volcano eruption and the aftermath of typhoon Tisoy,” he said.
Diokno said the uncertainty over the trade and economic policies in major economies continued to weigh down on global de2mand, thus mitigating upward pressures on commodity prices.
The last time the board cut the benchmark rate was in September 2019 meeting, also with a 25-bps adjustment to 4 percent.
BSP Deputy Governor Francisco Dakila said the MB revised slightly upward the inflation forecast this year to an average of 3 percent from the previous estimate of 2.9 percent.
Inflation quickened to an eight-month high of 2.9 percent in January.
The Department of Finance said inflation remained manageable but there was a need to boost food supply to reduce pressures on consumer prices.
“The price uptick is well within the 2 to 4 percent target for the year,” the department said in an economic bulletin. It said that “food supply needs to be scaled up to reduce inflationary pressures.”
It said Finance Secretary Carlos Dominguez discussed with Agriculture Secretary William Dar the need to adopt measures to boost food supply especially now that the open season for fish has started.
The agency said the downtrend in crude oil prices starting January could slow down inflation in the succeeding months.