Philippine Central Bank Holds Policy Rate, But Warns 2022 Inflation to Breach Target

The Philippine central bank held its key interest rate on Thursday in a bid to continue supporting economic recovery from the COVID-19 pandemic, but not without flagging high inflation risks.

The Bangko Sentral ng Pilipinas (BSP) kept its rate on the overnight reverse repurchase facility at 2.0 percent for an eleventh straight policy meeting.

Rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.

“The Monetary Board sees scope to maintain the BSP’s policy settings in order to safeguard the momentum of economic recovery amid increased uncertainty, even as it continues to develop its plans for the gradual normalization of its extraordinary liquidity measures,” BSP Governor Benjamin Diokno said.

The central bank had also noted that average inflation could breach the 2 to 4 percent target range in 2022 at 4.3 percent, higher than the February forecast of 3.7 percent

“Upside risks over the near term continue to emanate from the shortage in domestic pork and fish supply as well as from the potential impact of higher oil prices on transport fares,” BSP said in a press release, adding that it supports social protection measures for the surge in fuel prices due to the war in Ukraine.

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