The Philippine central bank on Thursday decided to keep the interest rate on the overnight reverse repurchase facility at 6.25 per cent amid persistent inflation pressure in the country.
The Bangko Sentral ng Pilipinas (BSP) also maintained the interest rate on the overnight deposit and lending facilities at 5.75 per cent and 6.75 per cent, respectively, reports Xinhua news agency.
BSP Governor Felipe Medalla told a news conference that the bank’s latest baseline projections “continue to suggest a gradual return of inflation to the target band of 2 per cent to 4 per cent over the policy horizon”.
The BSP forecasts average inflation for 2023 to settle at 5.4 per cent, slightly lower than 5.5 per cent in the previous forecast, while the average inflation forecast for 2024 now stands at 2.9 per cent from 2.8 per cent.
According to the Philippine Statistics Authority, year-on-year inflation in the Southeast Asian country slowed to 6.1 per cent in May from 6.6 per cent in April, the fourth consecutive month of deceleration in the headline inflation.
However, the balance of risks to the inflation outlook continues to lean towards the upside due to the potential impact of additional transport fare increases and minimum wage adjustments, persistent supply constraints of key food items, El Nino weather conditions, and possible knock-on effects of higher toll rates on agricultural prices, Medalla added.
The impact of a weaker-than-expected global economic recovery remains the primary downside risk to the outlook, he added.
Given these considerations, it is “appropriate” to maintain current monetary policy settings to allow the central bank to assess further how inflation and domestic demand have responded to tighter monetary conditions, Medalla said.
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