BSP keeps rates at record lows, says door open for further adjustments

The Bangko Sentral ng Pilipinas (BSP) on Thursday kept key policy rates at record lows, saying a continued pause is warranted for prior measures to work their way through the economy.

In a virtual briefing, BSP Governor Benjamin Diokno said the Monetary Board (MB) decided to keep key policy rates unchanged -- the overnight reverse repurchase (RRP) facility at 2.25%, the overnight deposit at 1.75%, and the overnight lending facility at 2.75%.

"The Monetary Board’s decision is based on the assessment that prevailing monetary policy settings remain appropriate. Latest baseline inflation forecasts show a slightly lower path within the Government’s 2-4 percent target range," said Diokno.

This comes as the BSP now expects inflation to clock in slower than expected in the previous policy meeting in August.

"The balance of risks to the inflation outlook also continues to lean toward the downside from 2020 until 2022 owing largely to the risk of potential disruptions to domestic and global economic activity amid the ongoing pandemic," Diokno said.

"Meanwhile, inflation expectations remain firmly anchored within the inflation target band," he added.

For this year, the BSP revised its inflation outlook to 2.3% from 2.6%. Forecasts were also revised for 2021 to 2.8% from 3.0%, and for 2022 to 3.0% from 3.1%.

"Given these considerations, the Monetary Board is of the view that a continued pause will allow prior measures by the BSP to further work their way through the economy," Diokno said.

"The gradual easing of restrictions, along with sustained efforts by the Government to protect human health and livelihood, should also help lift market sentiment and aid the recovery of the economy in succeeding months," he added.

More policy action

BSP Deputy Governor Franciso Dakila Jr. noted, however, that the door is open for more policy action should it be needed.

"It can be noted that the inflation environment remains benign and this gives us ample room for monetary policy action should that be warranted," he said in the same briefing.

The BSP has so far cut key interest rates by a total of 175 basis points this year -- 25 basis points in February, and 50 basis points each in March, April, and June. — RSJ, GMA News