By The Financial District
Jul 23, 20211 min
The Bangko Sentral ng Pilipinas has decided to keep the interest rate at 2.0 percent for the overnight reverse repurchase (RRP) as forecasts indicate that average inflation is likely to settle near the upper end of the government's 2-4 percent target range this year.
For the next two years, the BSP forecast sees the inflation rate to be easing towards the midpoint of the target range in 2022 and 2023. The continued implementation of direct non-monetary interventions to alleviate supply constraints shall be crucial in tempering pressures on meat prices and inflation.
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But the BSP said that with" the overall pace of recovery remain(ing) tentative amid the continued threat of COVID-19 infections, the continued implementation of targeted fiscal initiatives as well as the acceleration of the government’s vaccination program should facilitate the gradual reopening of the economy and thus strengthen market confidence."
Given these considerations, the BSP said it believes that the monetary policy stance will need to remain accommodative for as long as necessary in order to ensure the recovery of the economy.
Sustained monetary policy support should help the economic recovery gain more traction, especially as risk aversion continues to temper credit markets and overall activity.
Looking ahead, the BSP said it will remain vigilant against any emerging risks to the outlook for inflation and growth in order to ensure that monetary policy settings remain in line with its price and financial stability mandates.