Philippine Central Bank Holds Rate Steady

(RTTNews) - The Philippine central bank maintained its benchmark interest rate for the fourth consecutive meeting despite the rising inflation expectations.

The Monetary Board governed by Eli Remolona, maintained the target reverse repurchase rate at 6.50 percent, as widely expected.

Accordingly, the interest rates on the overnight deposit and lending facilities were maintained at 6.0 percent and 7.0 percent, respectively.

Previously, the bank had raised the rate by a quarter-point in October.

The bank has raised its inflation forecast for 2024 to 4.0 percent from 3.9 percent and the projection for 2025 was retained at 3.5 percent.

The monetary board observed that the risks to the inflation outlook continue to lean toward the upside. Although the upside risks to inflation raised inflation expectations, these expectations remained broadly anchored, policymakers said.

Policymakers said they are willing to adjust its monetary policy settings as necessary.

Official data showed that consumer price inflation accelerated to a three-month high of 3.7 percent in March from 3.4 percent in the previous month.

With the US Federal Reserve possibly pushing back the timing of its rate cuts to the second half of the year and Philippine inflation projected to breach the upper end of the central bank's target in the near term, the BSP is likely to extend its hold until the Fed finally cuts its own policy rates and headline inflation cools, ING economist Nicholas Mapa said.

Capital Economics economists said with inflation likely to drop back from the third quarter onwards and the resilience of the economy set to fade, policymakers will start to loosen policy later this year.