The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board (MB) has decided to maintain the country’s key policy rate, with inflation remaining a concern.
In its first policy rate meeting in 2024, the MB kept the benchmark interest rate at 6.5%, citing continued upward pressure on inflation. This marks the third consecutive meeting in which the MB has retained its rate, which has been unchanged since October 2023.
The BSP attributed the inflation forecasts to various factors including higher transport charges, increased electricity rates, higher oil and domestic food prices, and the impact of a strong El Niño episode. Additionally, the central bank noted that the main downside risk to the outlook is the impact of El Niño weather conditions.
However, there have been positive developments in addressing inflation risks. The government recently secured a five-year supply agreement with Vietnam to ensure a sustainable food supply, particularly for rice. The agreement stipulates that Vietnam will supply the Philippines with 1.5 to 2 million metric tons of white rice annually through its private sector.
Meanwhile, the interest rates on overnight deposit and lending facilities remained unchanged at 6.0%-7.0%. BSP Governor Eli Remolona Jr. has indicated that the MB will consider reducing the interest rate when inflation stabilizes within the government’s target range of 2% to 4%.
The BSP emphasized that it remains ready to adjust its monetary policy settings as necessary to ensure price stability, and that it will continue to monitor developments closely. The most recent report from the Philippine Statistics Authority showed a further dip in inflation, with the figure within the central bank’s target range for the second consecutive month.
