The Philippines’ central bank left its record low key interest rate unchanged on Thursday, in line with economists’ expectations. The Monetary Board of the Bangko Sentral Ng Pilipinas, led by Governor Benjamin Diokno, decided to hold the key interest rate, which is the overnight reverse repurchase facility rate, steady at 2.00 percent.
The interest rates on the overnight deposit and lending facilities were kept at 1.5 percent and 2.5 percent, respectively.
The previous change in interest rates was a quarter-point reduction in November 2020. The central bank earlier projected inflation to remain within the current target of 3.0 percent ± 1.0 ppt for 2022-2024.
The bank said inflation expectations remain well anchored to the target. That said, protracted dislocations in the global supply chains are expected to keep inflation elevated in the near term. The prevailing view is that the medium-term outlook would still likely be driven by fundamentals, supporting the decision to keep the current inflation target unchanged for 2022-2024, the bank said on December 13. ?Headline inflation slowed to 4.2 percent in November from 4.6 percent in the previous month. Core inflation, which excludes volatile food and energy items, fell to 3.3 percent from 3.4 percent. Capital Economics expects the Philippine interest rates to be left on hold throughout 2022, given the weak economic recovery post-Covid and the threat of resurgence in infections in the backdrop of the Omicron variant as the vaccination rate in the country is low. “With inflation falling and the economy still well below its pre-crisis level, the BSP is likely to keep monetary policy loose for the foreseeable future,” Capital Economics economist Gareth Leather said.