BSP maintains policy rates at record lows with inflation seen to fall within target range

The Bangko Sentral ng Pilipinas (BSP) on Wednesday decided to keep policy rates at record lows, with inflation now expected to settle lower than previously expected.

In a virtual briefing, BSP Governor Benjamin Diokno said the Monetary Board kept policy rates unchanged—the overnight reverse repurchase (RRP) facility at 2.00%, the overnight deposit at 1.5%, and the overnight lending facility at 2.5%.

"Inflation is now projected to track a slightly lower path in 2021 to average near the upper end of the target band, as price pressures on food commodities are abating," Diokno explained.

The BSP now expects inflation to settle at 3.9% this year, slower than the previous outlook of 4.2%.

According to BSP Deputy Governor Francisco Dakila Jr., inflation will likely remain elevated in the first three quarters of the year before falling into the 2% to 4% target in the last three months of 2021.

The updated outlook takes into consideration lower tariffs on pork imports, the first-quarter economic performance, the appreciation of the peso, and slower inflation in recent months.

President Rodrigo Duterte on May 10 issued Executive Order 133 which raised the minimum access volume

The Philippine economy shrank for the fifth consecutive quarter in the first three months of 2021, at -4.2%. Inflation for the same quarter averaged 4.5%.

Meanwhile, the BSP hiked its inflation outlook for 2022 to 3.0% from 2.8% to take into account  increases in global crude oil prices and faster prospects for the economic recovery.

"The risks to the inflation outlook are also broadly balanced. The Monetary Board emphasizes that the timely implementation of approved non-monetary measures will be crucial in mitigating further supply-side pressures on meat prices and inflation," said Diokno.

Moving forward, Diokno said the expected path of inflation and downside risks to the domestic economic growth warrant keeping monetary policy settings steady.

"Looking ahead, the BSP affirms that maintaining an accommodative stance should quicken the economy's transition toward a sustainable recovery," he said.

"The BSP remains committed to deploying its full range of instruments as appropriate in support of its price and financial stability mandates," added Diokno.—AOL, GMA News