BSP hikes inflation outlook, keeps policy rates at all-time low

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday decided to hike inflation forecasts for this year and the next amid the successive petroleum price hikes, but kept key policy rates at all-time lows.

BSP Governor Benjamin Diokno said the risks to the inflation outlook continue to lean slightly towards the upside for 2022, but remain broadly balanced for 2023.

“The inflation projections have slightly increased from the previous monetary policy meeting, reflecting the impact of higher domestic food inflation and global oil prices,” he said in a virtual briefing.

“Inflation expectations have likewise risen marginally but continued to be anchored within the target band,” he added.

The Monetary Board now expects inflation to clock in at an average of 3.7% for this year, higher than its earlier outlook of 3.4%. It also hiked its 2023 outlook to 3.3% from 3.2%.

Inflation decelerated to 3% in January, reflecting a deceleration from the 3.6% in December using the 2012 base year, and 3.2% using the 2018 base year.

Local oil firms implemented another big-time hike in the pump prices of petroleum products on Tuesday, marking the seventh straight week of increases. The Department of Energy attributed the movement to global supply chain disruptions.

“Downside risks still emanate from the lingering threat of COVID-19 infections owing to possible case resurgence from new variants, as delays in the easing of containment protocols could temper domestic growth prospects,” Diokno said.

Key policy rates were kept at record lows on Thursday — the overnight reverse repurchase facility at 2.0%, the overnight deposit facility at 1.5%, and the overnight lending facility at 2.5%.

The BSP also said on Thursday that it expects first-quarter economic growth to be hit by the upgrade of restrictions in Metro Manila to Alert Level 3 on January 3, 2022. This  was later downgraded to the looser Alert Level 2 starting February 1, 2022.

Economic output is also expected to have been impacted by the prolonged impact of Typhoon Odette (international name: Rai), which caused P13.8-billion worth of damages to the agriculture sector.

“On balance, the Monetary Board deems it prudent to maintain the BSP’s accommodative policy stance given a manageable inflation environment and emerging uncertainty surrounding domestic and global growth prospects,” Diokno said.

The governor noted that the central bank will continue to develop plans for the eventual normalization of its extraordinary liquidity measures when conditions warrant. —LBG, GMA News