BSP keeps interest rates steady
The Bangko Sentral ng Pilipinas (BSP) on Thursday maintained its key interest rates on the back of a “benign” inflation environment, subdued global economic activity and recovering domestic economy.
The central bank’s overnight borrowing, lending and deposit rates remained at 2.25 percent, 1.75 percent and 2.75 percent, respectively, after its policymaking Monetary Board held its fifth rate-setting policy meeting for 2020.
“The Monetary Board’s decision was based on its assessment that the inflation environment remains benign,” BSP Governor Benjamin Diokno told a virtual briefing.
Consumer price growth is still expected to fall within the government’s 2- to 4-percent target range, he said, as the latest baseline forecasts have risen slightly due to higher-than-expected inflation in July and recent increases in global crude oil prices.
Headline inflation accelerated to a six-month high of 2.7 percent last month.
“The balance of risks to the inflation outlook also leans toward the downside from 2020 until 2022, owing largely to potential disruptions to domestic and global economic activity amid the ongoing pandemic,” Diokno said, referring to the coronavirus disease 2019 (Covid-19) crisis.
Inflation expectations remain broadly consistent with the inflation target, he added.
According to BSP Deputy Governor Francisco Dakila Jr., the Bangko Sentral raised its inflation forecast from 2.3 percent to 2.6 percent for 2020, from 2.6 percent to 3 percent for 2021 and from 3 percent to 3.1 percent in 2022.
Monetary authorities noted that the global economic growth outlook remained subdued and uncertain amid a resurgence in Covid-19 cases in many countries.
As of Thursday, the number of confirmed cases in the Philippines increased by 4,339 to 178,022, of which 61,025 are active. Of the total, 114,114 have recovered and 2,883 succumbed to the highly infectious respiratory disease, which first emerged in the city of Wuhan in China’s central Hubei province.
Worldwide, the number of coronavirus infections has risen to 22,423,016, according to the latest Johns Hopkins University tally. Of this, 787,909 never recovered.
The board also noted the sharp contraction in gross domestic product in the first half of 2020, reflecting the impact of the enforcement of restrictive measures to contain the spread of the coronavirus in the country.
Domestic output shrank by 9 percent in the first half of the year after contracting by 0.7 percent and 16.5 percent in the first and second quarters, respectively, plunging the country into a technical recession.
“At the same time, the Monetary Board observed early signs of recovery in domestic economic activity with the gradual easing of lockdown restrictions, supported by ample liquidity in the financial system,” the central bank chief said.
Given these considerations, the board believes monetary policy settings remain appropriate for now, he added.
“A prudent pause will enable the cumulative 175-basis-point reduction in the policy rate, as well as other monetary and regulatory relief measures by the BSP to fully work their way through the economy, even as the national government continues to implement interventions to bolster economic activity and protect human lives and livelihoods,” Diokno said.
Source: TheManila Times
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