BSP retains 6.5% interest rate amid moderating inflation outlook
Metro Manila (CNN Philippines, November 16) — The policy-making Monetary Board on Thursday kept the interest rate at 6.5% as it projects a moderate inflation rate.
In October, it raised the interest rate outside the policy schedule by 25 basis points to 6.5%, from 6.25%.
READ: BSP raises interest rate to 6.5% off-cycle to address rising prices
The board also kept interest rates on overnight deposit and lending facilities at 6% and 7%, respectively.
"The latest projections indicate that the inflation outlook has moderated over the policy horizon," the Bangko Sentral ng Pilipinas (BSP) said Thursday.
"The risk-adjusted inflation forecasts remain above the target for 2024 at 4.4 percent (from 4.7 percent in the previous meeting in October) and within the target for 2025 at 3.4 percent (from 3.5 percent)," it also said.
Speaking to CNN Philippines The Final Word on Thursday, former BSP Deputy Governor Diwa Guinigundo said he had expected a different outcome, but expressed support for the monetary board's decision.
"The monetary board did the right thing to pause," he said. "But I would have wished that the central bank continued with the tightening monetary policy by another 25-basis points."
He also stressed that the pause does not imply that the BSP is abandoning a tight monetary policy.
Guinigundo said this allows a series of policy rate adjustments to work their way through the economy.
Inflation dipped from 6.1% in September to 4.9% in October.
The BSP said inflation outlook risk is still on the upside, associated with the "potential impact of higher transport charges, electricity rates, and international oil prices, as well as of higher-than-expected minimum wage adjustments in areas outside the National Capital Region."
The Monetary Board said monetary policy settings need to be sufficiently tight until a sustained downward trend in inflation becomes evident.
"Guided by incoming data, the BSP remains prepared to resume monetary policy tightening as necessary to steer inflation towards a target-consistent path, in line with its price stability mandate," it said.
