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April 12, 2024

BSP maintains interest rates

The Bangko Sentral ng Pilipinas’ Monetary Board opted to maintain the benchmark overnight borrowing rate at 6.50 percent during its meeting on February 15, 2024. It also held steady the interest rates on the overnight deposit and lending facilities at 6.0 percent and 7.0 percent, respectively.

According to the Monetary Board, the outlook for inflation showed little change. Its most recent risk-adjusted inflation forecast for 2024 decreased to 3.9 percent from the 4.2 percent projected in the previous meeting in December. For 2025, the risk-adjusted inflation forecast remained relatively stable at 3.5 percent, compared to the earlier projection of 3.4 percent.

The BSP’s latest survey of external forecasters also indicated that inflation expectations were firmly anchored, with mean forecasts remaining within the target range for both 2024 and 2025.

While the risks to the inflation outlook diminished, the board highlighted that they still leaned toward the upside. Factors contributing to these upside risks included higher transport charges, increased electricity rates, elevated oil and domestic food prices, and the potential impact of a strong El Niño episode on food prices. Conversely, the implementation of government measures to mitigate the effects of El Niño was identified as the primary downside risk to the outlook.

The BSP expressed optimism regarding recent agreements, particularly with Vietnam, aimed at securing rice supply over the next five years. Efforts to enhance productivity in the rice sector, such as the distribution of drought-resistant seeds, were seen as positive steps in addressing supply-side pressures.

Despite the sustained expansion in output in Q4 2023, the BSP acknowledged indications suggesting a potential moderation in economic activity in the near term due to the full impact of prior monetary policy tightening.

Considering prevailing risks, the Monetary Board said it deemed it appropriate to maintain the BSP’s monetary policy settings unchanged in the near term, while also expressing continued support for the national government’s non-monetary measures to alleviate supply-side pressures on prices and sustain the disinflation process.

The BSP reiterated its readiness to adjust monetary policy settings as necessary to fulfill its primary mandate of safeguarding price stability.