Philippines' central bank keeps interest rates unchanged

17 May '24

2 min read

Philippines' central bank keeps interest rates unchanged

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Insights

The Philippine central bank's Monetary Board has kept the target reverse repurchase rate at 6.50 per cent.
Amid inflationary pressures from transport, food, electricity, and oil prices, inflation is expected to stay near the upper limit.
While GDP growth remains steady, a tight monetary policy aims to anchor inflation expectations and counter future risks.

Bangko Sentral ng Pilipinas (BSP) Monetary Board has opted to maintain the target reverse repurchase (RRP) rate at 6.50 per cent. The overnight deposit and lending facilities' interest rates also remain unchanged at 6.0 per cent and 7.0 per cent, respectively.

The decision comes amidst continued upward pressure on inflation, primarily attributed to rising transport charges, food prices, electricity rates, and global oil prices.

BSP's latest forecasts project inflation to hover close to the upper end of the target range. However, there's a slight easing in the risk-adjusted inflation forecast for 2024 to 3.8 per cent from 4.0 per cent, while the forecast for 2025 has been revised upward to 3.7 per cent from 3.5 per cent. Despite these adjustments, inflation expectations remain firmly anchored, the Monetary Board said in a press release.

While recent GDP data indicates a steady growth trajectory, there are signs of moderation under tight financial conditions.

To ensure inflation settles within the target range, the Monetary Board advocates maintaining a tight monetary policy stance. This approach not only helps anchor inflation expectations but also mitigates potential upward risks to future inflation.

Furthermore, the Monetary Board reaffirms its support for non-monetary measures by the National Government to alleviate supply-side pressures on food prices and curb second-round effects.

Looking ahead, the BSP stands ready to adjust its monetary policy settings as needed to fulfil its primary mandate of safeguarding price stability.

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