BSP keeps policy rate at 6.5%, monetary board announces

The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board (MB) has decided to maintain the target reverse repurchase rate at 6.5%. This marks the fifth consecutive time that the MB has kept the interest rate steady, following an off-cycle policy rate hike in October 2023 aimed at addressing supply-side inflation pressures.

During a press conference on Thursday, the MB cited the ongoing inflation outlook leaning towards the upside as the reason for maintaining its policy rates. Factors contributing to potential price pressures include higher transport charges, food prices, electricity rates, and global oil prices.

Inflation in the Philippines has been on the rise for the past two months, with the rate climbing from 3.7% in March to 3.8% in April. This surge is primarily driven by increased costs in food and transport.

Despite the decision to retain the interest rates, overnight deposit and lending facilities will continue to have rates unchanged at 6.0% and 7.0%, respectively. The BSP also released a separate press statement reaffirming its confidence in the country’s domestic output growth over the medium term, despite recent indicators pointing to a slowdown under tight financial conditions.

BSP Governor Eli Remolina, speaking at the same briefing, mentioned a shift to a “less hawkish” stance and hinted at a possible rate cut in August. “We are actually somewhat less hawkish than before, which means we could ease or cut rates in the third quarter or fourth quarter of this year, so the second half of this year,” Remolina stated.

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