Manila - In the face of ongoing inflation concerns, the Bangko Sentral ng Pilipinas (BSP) has indicated that it will maintain a "sufficiently tight" monetary policy stance for the time being.
According to Philippines News Agency, the BSP on Tuesday night, the decision follows the observation of a slight deceleration in inflation in October to 4.9 percent, down from 6.1 percent in the previous month, with the 10-month average standing at 6.4 percent. Despite the reduced rate, driven primarily by lower food and non-alcoholic beverage prices, the BSP foresees continued elevated inflation, with the 2024 forecast nearing the higher end of the target range. Inflation expectations have risen, underpinning the potential for second-round effects.
The central bank acknowledges the persistent risks to the inflation outlook, projecting an upside through 2025. Factors influencing this view include the likelihood of increased transportation fares, higher power and oil prices, wage adjustments, and the possible non-extension of reduced import duties. While these pressures persist, possible mitigating factors could include a weaker global recovery and effective government measures to counteract the impact of the El Niño weather phenomenon.
These considerations, together with upcoming third-quarter domestic growth figures from the Philippine Statistics Authority, will inform the BSP's Monetary Board (MB) during their rate-setting meeting on November 16. The MB underscores the importance of maintaining tight policy settings to stabilize inflation expectations and achieve a consistent decline in inflation rates. The BSP affirms its readiness to adjust policy as needed to prevent further price pressures and misalignment of inflation expectations.
Previously, the MB implemented an off-cycle rate hike of 25 basis points on October 26, setting the reverse repurchase rate at 6.5 percent to address the ongoing high inflation.