PRUDENT PAUSE FOR BSP

The Bangko Sentral ng Pilipnas (BSP) is allowing for a "prudent pause" in its monetary policy setting for which reason it is not changing its cumulative 175 basis point reduction until it had worked its way through the economy.

Thus, the Monetary Board decided not alter its policy interest rate policy rate as well as other even as the National Government continues to implement interventions to bolster economic activity and protect human lives and livelihoods.

The Monetary Board’s (MB) decision to maintain the BSP’s policy interest rate was based on its assessment that the inflation environment remains benign. 

The latest baseline forecasts indicate that inflation could settle within the government’s target range of 3.0 percent ± 1.0 percentage point at 2.6 percent for 2020, 3.0 percent for 2021, and 3.1 percent for 2022.

Consistent with the latest baseline inflation forecasts, inflation expectations have remained well within the government’s target range. In assessing the monetary policy stance, the MB also considered that the overall balance of risks to the inflation outlook remains tilted to the downside for 2021 to 2022.

The potential impact of a more disruptive COVID-19 epidemic on global and domestic economic growth is seen as the primary downside risk factor to inflation over the policy horizon.

Meanwhile, adjustments in power and water rates are the main upside risks to inflation. The MB also observed that the outlook for global economic growth remain subdued and uncertain amid a resurgence in COVID-19 cases in many jurisdictions. 

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