Monetary Board maintains policy settings

THE Bangko Sentral ng Pilipinas’ (BSP) Monetary Board, in a meeting on Wednesday, February 14, had decided to keep the BSP’s Target Reverse Repurchase (RRP) Rate unchanged at 6.50 percent. Thus, the interest rates on the overnight deposit and lending facilities were kept at 6.0 percent and 7.0 percent, respectively.

The Monetary Board noted that 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. For 2025, the risk-adjusted inflation forecast is relatively steady at 3.5 percent from 3.4 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.

Meanwhile, the risks to the inflation outlook have receded but remain 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. On the other hand, the implementation of government measures to mitigate the impact of El Niño weather conditions 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. 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 sustained expansion in output in Q4 2023 reaffirms the BSP’s view that the country’s growth momentum remains intact over the medium term. 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.

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. The BSP also continues to support the National Government’s non-monetary measures to address supply-side pressures on prices and sustain the disinflation process.