• Melo Acuna

MB keeps interest rates

Monetary Board opts to keep its policy settings

MANILA – The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, in its meeting today, decided to maintain the interest rate on the BSP’s overnight reverse repurchase (RRP) facility at 2.24 percent.

The interest rates on overnight deposit and lending facilities were likewise kept at 1.75 percent and 2.75 percent, respectively.

The Monetary Board’s decision was founded on. Its assessment that the inflation environment remains benign. While the latest baseline forecasts have risen slightly due to the higher-than-expected inflation in July and recent increases in global crude oil prices, the future inflation path remains strongly within the Government’s 2 to 4 percent target.

The BSP said the balance of risks to the inflation outlook also relies toward the downside from 2020 until 2022 owing largely to potential disruptions to domestic and global economic activity amid the ongoing pandemic. Inflation expectations remain in accord with the inflation target.

The Monetary Board has recognized that the outlook for global economic growth remained subdued and uncertain amid the resurgence in COVID-19 cases in many areas. The MB also saw th sharp contraction in domestic output during the first half of 2020 which reflected the impact of the tight lockdown measures to contain the virus.

“At the same time, the Monetary Board observed early signs of recovery in domestic economic activity with the gradual easing of lockdown restrictions, supported by ample liquidity in the financial system,” the statement revealed.

Taking all these into consideration, the Monetary Board, chaired by Governor Benjamin E. Diokno believes the monetary policy settings remain appropriate for the current period. A prudent pause will enable the cumulative 175-basis-point reduction in the policy rate as well as other monetary and regulatory relief measures by the BSP to fully work their way through the economy, even as the National Government continues to implement interventions to bolster economic activity and protect human lives and livelihoods.

It reiterated its commitment to deploy its full range of instruments as required in fulfillment of its mandate to promote non-inflationary and sustainable growth over the medium term.

Deputy Governor Francisco G. Dakila, Jr. said they have made several adjustments to their baseline forecast.

Speaking at the press briefing, Deputy Governor Dakila said for this year, during their June 25 MB meeting, they had a forecast of 2.3 percent inflation.

“During the meeting today, we are adjusting the 2020 forecast to 2.6% and for 2021, in the previous board meeting we had a baseline of 2.6% but now we are adjusting it upward to 3.0%,” he said. He added for 2022, during their past board meeting, the forecast was at 3.0%.

“Now, this would be adjusted to 3.1%,” he further explained.

The senior bank official said the inflation rate last June and July proved higher than their initial baseline projection. However, all there were all within the forecast range, he concluded. (Melo M. Acuña)

BSP Deputy Governor for Monetary and Economics Sector Francisco G. DAkila, Jr. (Screen grab from BSP Press Conference.)

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