BSP revises inflation outlook upward, keeps policy settings unchanged

The Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) on Monday decided to keep policy rates at 16-year-highs for the fourth straight meeting, as it hiked its inflation forecast for the year.

In a briefing on Thursday, BSP governor Eli Remolona Jr. said the MB kept the target reverse repurchase (RRP) rate at 6.5%, the overnight deposit rate at 6.0%, and the overnight lending facility rate at 7.0%.

This comes as the risk-adjusted inflation outlook was revised upward to 4.0% from the previous 3.9% forecast, falling at the upper band of the government’s 2.0% to 4.0% target range. The 2025 outlook was unchanged at 3.5%.

“The risks to the inflation outlook continue to lean toward the upside. Possible further price pressures are linked mainly to higher transport charges, elevated food prices, higher electricity rates, and global oil prices,” Remolona said.

“Potential minimum wage adjustments could also give rise to second-round effects,” he added.

Results of a survey released last week show that the controlling inflation was the top concern of Filipinos across geographical areas and socio-economic classes.

Inflation clocked in at 3.7% in March, faster than the 3.4% in the previous month. Rice inflation, however, has hit a 15-year high of 24.4%.

Remolona said that while upside risks to inflation have raised expectations, these remained broadly anchored, and that domestic growth prospects continue to “largely intact” over the medium term.

“Given these conditions, the Monetary Board deems it appropriate to maintain the BSP’s tight monetary policy settings. The BSP also continues to support the National Government’s policies and programs to address supply-side pressures on the prices of key food commodities,” he said.

Remolona said the central bank also “remains ready” to adjust policy settings as necessary, in keeping with its primary mandate of keeping price stability.

The central bank raised key policy rates by 450 basis points since May 2022, in a bid to tame inflation which averaged 6.0% in 2023, higher than the target range of 2.0% to 4.0%. — BM, GMA Integrated News