BSP raises key rate by 25 bps

eration the rising risks to the inflation outlook for the next two years.

“The balance of risks to the inflation outlook now leans toward the upside for both 2022 and 2023, with upside pressures emanating from the potential impact of higher oil prices, including on transport fares, as well as the continued shortage in domestic pork and fish supply,” said Diokno.

The downside risks are still primarily the potential impact of a weaker-than-expected global economic recovery, threats of Covid-19 resurgence, as well as the still ongoing Russia-Ukraine war and tightening of global financial conditions.

In addition, unlike in February and March, the central bank now detects emerging secondround effects from the higherthan-expected wage hikes in the National Capital Region and Western Visayas. Inflation expectations have likewise risen, highlighting the risk posed by sustained pressures on future wage and price outcomes, said Diokno.

“Given these considerations, the Monetary Board believes that a timely increase in the BSP’s policy interest rate will help arrest further secondround effects and temper the buildup in inflation expectations,” said Diokno.

He added that on balance, the “persistent inflationary pressures point to the need for prompt monetary action to anchor inflation expectations.”

“As the economic recovery continues to gain traction, the BSP will proceed with its plans for the continued gradual withdrawal of its extraordinary liquidity interventions and the start of the normalization of its monetary policy settings,” said the BSP chief.

While the BSP is prepared and ready to deal with all risks to inflation and growth outlook, Diokno reiterated that “any adjustments in the monetary policy stance will be done in a timely manner so as not to disrupt the growth momentum while preventing price pressures from becoming entrenched.”

He also said inflation pressures in recent months have been linked mainly to supply side factors which are still best addressed by targeted nonmonetary interventions by the National Government.