Category : Press Release
Date : June 24, 2021
Agency : Bangko Sentral ng Pilipinas
Title : Monetary Board Maintains Policy Settings
Article : ??At its meeting on monetary policy today, the Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase facility at 2.0 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.

Latest inflation forecasts indicate that the average inflation is likely to settle near the upper end of the target range of 2-4 percent in 2021; the BSP expects that average inflation will ease towards the midpoint of the target range in 2022 and 2023. Price pressures on food commodities have abated with favorable weather conditions and the facilitation of meat imports to augment domestic supply. The Monetary Board emphasizes that the continued implementation of direct non-monetary measures will be crucial in mitigating further supply-side pressures on meat prices and inflation.

At the same time, the risks to the inflation outlook remain broadly balanced around the baseline projection path. The uptick in international commodity prices amid supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation. However, downside risks to the inflation outlook continue to emanate from the emergence of new coronavirus variants, which could delay the easing of containment measures and temper prospects for domestic growth.

The Monetary Board also observed that economic activity has improved in recent weeks, but the overall momentum of the economic recovery remains tentative as the threat of COVID-19 infections continues. Nevertheless, the sustained implementation of targeted fiscal initiatives as well as the acceleration of the Government’s vaccination program should help boost market confidence and recovery of the economy in the coming months.

On balance, the expected path of inflation and downside risks to domestic economic growth warrant keeping monetary policy settings unchanged. The Monetary Board believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction, especially as risk aversion continues to temper credit activity despite ample liquidity in the financial system.

Looking ahead, the BSP affirms its support to the economy for as long as necessary to ensure its strong and sustainable recovery. The BSP will also remain vigilant against any emerging risks to the outlook for inflation and growth and will adjust its policy settings as needed to safeguard its price and financial stability objectives.