16-11-2023 (MANILA) The Bangko Sentral ng Pilipinas, the central bank of the Philippines, opted to keep its policy rate unchanged at 6.5% on Thursday, aligning with expectations. The central bank emphasized that the battle against inflation was ongoing, hinting that it might consider another rate hike in the future.
Despite revising down its “risk-adjusted” inflation forecasts for the current year and the next, the central bank stressed that the risk to the inflation outlook still leaned significantly towards the upside. The inflation estimates for 2022 and 2023 were lowered to 6.1% and 4.4%, respectively, from previous projections of 6.2% and 4.7%. The central bank expressed its readiness to resume policy tightening if necessary to steer inflation towards its target range of 2%-4%.
Deputy Governor Francisco Dakila stated during a media briefing, “The Monetary Board continues to deem it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes fully evident and inflation expectations are firmly anchored.”
The central bank’s decision to maintain the policy rate came after a 25 basis point hike in an off-cycle review in October. Dakila noted that keeping the policy rate steady would allow the effects of previous adjustments to continue working through the economy.
In the face of persistent high inflation, the Philippines has been grappling with its impact on domestic demand, a vital driver of economic growth. The central bank has raised rates by 450 basis points since May 2022, aiming to address inflationary pressures.
Following the central bank’s decision, the Philippine peso experienced a marginal 0.2% decline against the U.S. dollar, reaching 55.79. Analysts largely anticipated the steady policy rate, with only a minority expecting a 25 basis point hike.
BSP Governor Eli Remolona, speaking before the policy rate decision, suggested that inflation might ease back into the target range of 2%-4% in the coming year. However, he cautioned that the country was “not out of the woods yet.”
Economists remain divided on the future course of monetary policy, with some suggesting that the tightening cycle may be over, while others are not ruling out further hikes if inflation risks resurface. The next scheduled meeting of the BSP is on December 14, marking the final one for the year.
