BSP: “The inflation target remains at risk over the policy horizon owing to broadening price pressures.”
BSP — On Thursday, the Bangko Sentral ng Pilipinas said that the Monetary Board decided to hike policy rates by 50 basis points (bps) effective August 19.
As such, the overnight deposit facility has increased to 3.25%, the overnight reverse repurchase facility has increased to 3.75%, and and the overnight lending facility has increased to 4.25%.
The central bank continued to tighten rates as consumer prices are still seen to increase higher than the Philippine government’s target range for the year.
BSP Governor Felipe Medalla said at a virtual briefing that the central bank’s Monetary Board decided to increase policy rates by 50 basis points effective August 19.
“The inflation target remains at risk over the policy horizon owing to broadening price pressures,” Medalla said. “Elevated inflation expectations likewise highlight the risk of further second-round effects.”
BSP increased its 2022 inflation outlook to 5.4% (from the previously forecasted 5.0%) while it decreased its 2023 outlook to 4.0% (from 4.2%) and for 2024 to 3.2% (from 3.3%).
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According to the BSP chief, upside risks continue to dominate the inflation outlook up to next year because of potential impact of higher global non-oil prices, sharp increase in the price of sugar, continued shortage in domestic fish supply, and pending petitions for transport fare increases.
Medalla also said that the impact of a “weaker-than-expected” global economic recovery as well as the resurgence of local coronavirus infections “continue to be the main downside risks to the outlook”.
He added that given the employment outturns and “ample” liquidity and credit, the overall domestic demand conditions have “generally held firm” despite moderation in economic activity.
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