The latest inflation path has shifted slightly higher

The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board (MB) decided to retain its target reverse repurchase rate at 6.5%.

In the MB’s second policy rate meeting in 2024, the board kept the benchmark interest rate steady at 6.5%, as the inflation outlook ‘continues to lean toward the upside.’

‘The latest inflation path has shifted slightly higher, but remains within target,’ BSP Governor Eli Remolona said in a press briefing with the members of the press on Monday.

This has been the fourth time the MB has kept its interest rate. The latest rate print has been implemented by the MB after its rate hike on October 2023 to mitigate supply-side inflation pressures.

With the MB’s retention, interest rates on overnight deposit and lending facilities remained unchanged at 6.0% and 7.0% respectively.

The MB linked the price pressure to higher transport charges, elevated food prices, higher electricity rates and global oil prices.

Potential minimum wage adjustments that have been lobbied in Congress might have given rise to ‘second-round effects,’ according to the BSP.

Meanwhile, the risk-adjusted inflation forecast for 2024 has increased to 4% from 3.9% in the previous policy rate meeting.

The BSP chief said that the MB will stay hawkish due to the supply-side inflation risks. However, it does not ‘contemplate’ tightening the policy rates even further.

‘The upside risks mainly have become worse so that would make us somewhat more hawkish than before,’ Remolona said.

Remolona likewise said that if price pressures eased and the MB toned down its policy stance in the third quarter of 2024, the board might reduce rates by no more than 25 basis points.

On April 5, the Philippine Statistics Authority reported an acceleration in the country’s inflation to 3.7%, which is within the central bank’s target.