14.12.202307:28:00UTC+00Philippine Central Bank Holds Key Rates

The Bangko Sentral ng Pilipinas kept its policy rates unchanged on Thursday and signaled that the policy needs to remain tight for the foreseeable future.

The Monetary Board, led by Governor Eli Remolona, left the target reverse repurchase rate unchanged at 6.50 percent.

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

The bank had raised the policy rate by a quarter-point at an unscheduled meeting in October.

Policymakers said the balance of risks to the inflation outlook still leans significantly toward the upside. The bank cited higher transport costs, increased electricity rates and higher oil prices as key upside risks.

Inflation forecast for 2024 was lowered to 4.2 percent from 4.4 percent in the previous meeting in November. For 2025, inflation outlook was left unchanged at 3.4 percent.

The board said the monetary policy settings need to be sufficiently tight to allow inflation expectations to settle more firmly within the target range. With inflation likely to ease further over the coming months and growth set to struggle, rate cuts will come onto the agenda sooner than most expect, Capital Economics' economist Gareth Leather said.

The economist expects the BSP to cut rates in April and lower borrowing costs by a total of 200 basis points next year.