WITH the last two monetary policy meetings in 2021, the Bangko Sentral ng Pilipinas (BSP) is likely to maintain the interest rates for the rest of the year amid the manageable inflation level.
BSP Governor Benjamin Diokno said in a TV interview on Monday that their accommodative monetary policy settings will stay until the end of the year.
“It appears that there won’t be any policy rate adjustments between now and the end of the year,” he said.
In the last monetary policy meeting, the Monetary Board kept the interest rate on the overnight reverse repurchase facility at 2 percent. Overnight deposit and lending facilities were also untouched at 1.5 percent and 2.5 percent, respectively.
This is in contrast with what is happening for some other central banks, which have decided to increase their interest rates.
“They fear inflation and…they see their exchange rate deteriorating so fast. As a result, some of them have adjusted the policy rates,” Diokno said.
He reiterated, however, that the country has a “hefty” gross international reserves amounting to $108 billion, in addition to inflow of overseas Filipino remittances, receipts from the business-process outsourcing sector and exports.
“We are fairly comfortable that we don’t need to raise interest rates at this time,” he said.
In addition, Diokno maintained that the inflation this year is expected to average at 4.5 percent. This is seen to further ease to 3.3 percent and 3.2 percent in the next two years.
“That is within our target band of 2-4 percent. That’s what we mean that it is transitory,” he said.
Consumer prices in September eased to 4.8 percent from 4.9 percent a month earlier, bringing the average figure to 4.5 percent.
The BSP chief, who shrugged off concerns over stagflation, said they are also sticking with the economic growth forecast of 4 to 5 percent this year by the Development Budget Coordination Committee.
“Stagflation means low growth and high unemployment. That is not within our prognosis,” he stressed.
“The economy will pick up in the fourth quarter of this year. In fact, there may be some good numbers that will come out from third quarter,” he added.
He said the GDP will continue to be supported by exports, imports, foreign direct investments and OFW remittances.
The last two monetary policy meetings are scheduled in November and December.