By Komfie Manalo
The Monetary Board (MB) on Thursday decided to maintain the current key policy rates on the back of an optimistic forecast of inflation easing in the second half of 2024.
In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the MB kept the overnight reverse repurchase (RRP) facility interest rate at 6.5%. In contrast, overnight deposit and lending facilities were maintained at six and seven percent, respectively.
"Inflation is moving closer to the midpoint of the 2 – 4% target range. The risk-adjusted inflation forecasts have eased to 3.1 percent for 2024 and 2025 from 3.8% to 3.7%, respectively. Based on the BSP's latest market forecaster survey, Remolona said inflation expectations remain well-anchored.
According to him, the MB anticipates price pressures to soften starting in the second half of 2024 as an effect of Executive Order 62, which lowers the tariff for imported rice, and Administrative Order 20, which eases the importation process for agricultural products.
However, the central bank chief said higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation.
He added uncertainties in the global market call for some caution against potential spillovers, including those in the financial markets.
"On balance, the Monetary Board deems it appropriate to hold monetary policy settings steady at this time," Remolona said.
Aside from the "well-anchored" inflation, the BSP chief said gross domestic product (GDP) growth prospects remain in line with the medium-term trends due to favorable labor market conditions and net solid exports.
"Looking ahead, the BSP will ensure that monetary policy settings remain in line with its primary mandate to safeguard price stability conducive to sustainable economic growth," Remolona said.