The Bangko Sentral ng Pilipinas (BSP) still maintained its key interest rates at their record low on Thursday despite forecasting inflation to average at the upper end of its target this year.
Overnight borrowing, lending and deposit rates remained at 2.00 percent, 1.50 percent and 2.50 percent, respectively, after the central bank’s policymaking Monetary Board held its first rate-setting policy meeting for 2021.
“The Monetary Board noted that inflation is likely to remain elevated in the coming months, reflecting the impact of supply constraints on domestic prices of key food commodities, such as meat and vegetables, as well as the recent uptick in international oil prices,” BSP Governor Benjamin Diokno said in a virtual briefing.
Consumer price growth in the country last month jumped to a two-year high of 4.2 percent on the back of higher prices of meat, particularly pork.
According to Bangko Sentral Deputy Governor Francisco Dakila Jr., the central bank raised its inflation estimate from 3.2 percent to 4 percent for this year on account of supply-side pressures.
Meanwhile, the 2022 outlook was cut to 2.7 percent from 2.9 percent.
“This is indicative of the nature of the pressures on inflation — that they come all from the supply side, and therefore, should be transitory in nature,” Dakila said.
Diokno said the central bank’s latest baseline projections showed inflation returning to within its target range of 2 to 4 percent over the policy horizon as supply-side influences subside. Monetary authorities noted that Inflation expectations continue to be anchored within the target band.
“The balance of risks to the inflation outlook now appears to be broadly balanced around the baseline path in 2021, but is seen to continue leaning toward the downside in 2022,” he added.
The Bangko Sentral chief also said upside pressures on commodity prices could come from the tighter supply of meat products, owing partly to the African swine fever outbreak in the country. However, the coronavirus pandemic may continue to pose downside risks to demand and to the inflation forecast.
The emergence of new variants of the coronavirus and possible delays in mass vaccination programs also continue to temper prospects for economic recovery and growth despite the improvement in recent indicators of activity and sentiment, according to him.
“On balance, the Monetary Board is of the view that the manageable inflation outlook continues to allow the BSP to maintain an accommodative policy stance and thus complement crucial fiscal policy measures in supporting economic activity and market confidence,” Diokno said.
He also said the board “reiterates its support for urgent and coordinated efforts with government agencies in implementing nonmonetary interventions to enable all Filipinos access to internationally competitively priced food and thereby mitigate the impact of supply-side factors on inflation.”
Diokno assured that the central bank would take necessary measures to ensure that its monetary policy stance continued to support economic recovery that is consistent with its price and financial stability mandate.
Source: ManilaTimes
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