BSP extends rate pause as inflation eases

MANILA, Philippines — The Bangko Sentral ng Pilipinas kept its benchmark rate unchanged on Thursday, as inflation continued to ease.

At its meeting, the Monetary Board kept the rate on the BSP’s overnight reverse repurchase facility at 6.25%.

The interest rates on the overnight deposit and lending facilities were likewise retained at 5.75% and 6.75%, respectively.

“Latest baseline projections continue to show a return to inflation target in the fourth quarter of 2023 despite a generally higher path for inflation relative to the previous forecast from the monetary policy meeting in June, reflecting mainly the impact of higher international oil prices,” the BSP said.

The central bank said average inflation for 2023 is seen to reach 5.6%, or above its 2-4% annual target, while the average inflation forecasts for 2024 and 2025 now stand at 3.3% and 3.4%, respectively.

Nonetheless, the BSP said the balance of risks to the inflation forecast continues to lean towards the upside.

“Potential price pressures are linked to the impact of possible higher transport charges; higher minimum wage adjustments; persistent supply constraints on key food items; and the effects of El Niño weather conditions on food prices and power rates,” the BSP said.

“Meanwhile, a weaker-than-expected global economic recovery remains the primary downside risk to the inflation outlook,” it added.