The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, on Thursday maintained the overnight borrowing rate at a record-low of 2 percent to support economic growth amid the global pandemic.
BSP Governor and MB Chairman Benjamin Diokno said in an online briefing the interest rates on the overnight deposit and lending facilities were also kept at 1.5 percent and 2.5 percent, respectively.
“On balance, the Monetary Board is of the view that the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings unchanged,” Diokno said.
He said latest inflation forecasts shifted marginally higher, reflecting the recent increase in global commodity prices and the depreciation of the peso.
The average inflation is seen to settle slightly above the upper end of the target band of 2 percent to 4 percent in 2021.
He said with the continued and timely implementation of non-monetary initiatives and reforms to mitigate supply-side pressures on meat and other food prices, inflation is projected to ease towards the midpoint of the target range in 2022 and 2023.
Meanwhile, inflation expectations remain firmly aligned with the baseline projection path, according to the Bangko Sentral.
“At the same time, the risks to the inflation outlook remain broadly balanced over the policy horizon. The uptick in international commodity prices due to improving global demand amid lingering supply-chain bottlenecks could lend upside pressures to inflation,” said Diokno.
“However, downside risks to the inflation outlook are also seen from the spread of more contagious coronavirus variants. In particular, delays in the lifting of containment measures could further dampen prospects for global growth and domestic demand,” he said.
He said the Monetary Board also observed that the rei-mposition of quarantine measures to arrest the recent wave of COVID-19 infections could pose a risk to the ongoing economic recovery.
“To this end, targeted fiscal and health interventions, especially the acceleration of the government’s vaccination program, will be crucial in safeguarding public health and preventing deeper negative effects on the Philippine economy,” he said.
Diokno said the Monetary Board remained keen on sustaining monetary policy support “for as long as necessary” in order for the momentum of economic recovery to gain more traction as well as to help boost domestic demand and market confidence, especially as risk aversion continues to temper credit activity.
“The BSP will remain vigilant against any emerging risks to the outlook for inflation and growth. The BSP stands ready to adjust its policy settings as needed to ensure price and financial stability conducive to a sustainable economic recovery,” he said.
Inflation in July 2021 decelerated to a seven-month low of 4.0 percent from 4.1 percent in June.