MANILA - The Bangko Sentral ng Pilipinas intends to keep interest rates low for “many quarters to come” and that inflation was the “least” of its worries despite consumer prices rising at their fastest pace since March 2019.

BSP Governor Benjamin Diokno said Tuesday that while inflation quickened to 3.5 percent in December last year, this was transitory and mainly due to the effects of recent storms.

• Inflation quickens to 3.5 percent in December as food, transpo costs spike

Diokno said the central bank intended to keep interest rates low to support economic recovery which he said may hit 6.5 to 7.5 percent this year, and even higher next year.

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“Interest rates I think will be around this level, which is around 2 percent for many quarters to come,” Diokno said in an interview with ANC.

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During its last policy meeting in December, the BSP kept the rate on the overnight reverse repurchase facility at a record low of 2 percent. The rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively.

The central bank is set to again review monetary policy on Feb. 11.

The BSP reduced interest rates by a cumulative 200 basis points in 2020, and cut the reserve requirement ratio for banks by 200 basis points to 12 percent.

Diokno said he intends to further cut the reserve requirement to single digits by the end of his term in 2023.

Besides cutting rates and banks’ required reserves, the BSP also provided extra liquidity support by purchasing government securities and extending loans to the government.

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Despite the BSP loosening monetary policy, Philippine banks have kept a tight lid on lending amid a rise in bad loans.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp, said inflation should now remain benign until February, justifying more monetary easing, before prices potentially push higher again from March.

- With a report from Reuters