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September 22, 2023

Monetary Board forecasts higher inflation, oil prices but keeps policy rates steady

The seven-man Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) on Thursday kept unchanged the rate at which it borrows from or lends to banks at 2 percent.

The interest charges on overnight deposit and lending windows were similarly kept steady at 1.5 percent and 2.5 percent, respectively.

The decision to hold the rates where they were at the last rate-setting MB meeting on February 17 was expected by experts and analysts alike, including former Deputy BSP Governor Diwa C. Guinigundo.

Nevertheless, the MB has recalibrated the forecast inflation for this year to average higher than target to 4.3 percent this year instead of only 3.7 percent at the last MB meeting on February 17.

BSP Governor Benjamin E. Diokno attributed the adjustment to “sharp increases in crude oil prices” occasioned by the ongoing conflict between Russia and Ukraine.

Next year’s forecast inflation has likewise been scaled up from only 3.3 percent at the February 17 MB meeting to 3.6 percent instead.

The adjustments in the baseline forecasts for inflation also recognized that Dubai crude oil prices seen averaging only $83.33 per barrel at the February 17 meeting had been readjusted to reflect the elevated risks to $102.23 per barrel.

As for next year, the forecast price of a barrel of Dubai oil seen originally averaging $75.69 per barrel had been adjusted higher to $88.21 per barrel.

“Latest baseline forecasts have increased from the previous monetary policy meeting, reflecting the impact of higher global commodity prices,” Diokno said.


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