MANILA - The Bangko Sentral ng Pilipinas kept its overnight reverse repurchase rate steady at the record low 2 percent in line with analysts' forecasts.

"The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5 percent and 2.5 percent, respectively," BSP Governor Benjamin Diokno said.

This was the sixth straight policy meeting that the central bank held off on adjusting rates as it tries to support economic recovery amid the continuing disruptions caused by the COVID-19 pandemic.

The BSP said the risks to the inflation outlook remain broadly balanced over the policy horizon.

Inflation slowed to 4 percent in July, its lowest level in 4 months, as food and transport costs stabilized.

• Inflation slows further to 4 percent in July; settles within gov't target band

"Latest inflation forecasts have shifted marginally higher, reflecting the recent increase in global commodity prices and the depreciation of the peso," the BSP said.

The central bank said it expects average inflation to settle slightly above the upper end of the target band of 2 to 4 percent in 2021.

"With the continued and timely implementation of non-monetary initiatives and reforms to mitigate supply-side pressures on meat and other food prices, inflation is projected to ease towards the midpoint of the target range in 2022 and 2023," the BSP said.

The recent lockdowns meant to check the spread of the Delta variant "could pose a risk to the ongoing economic recovery" according to the BSP.

"To this end, targeted fiscal and health interventions, especially the acceleration of the Government’s vaccination program, will be crucial in safeguarding public health and preventing deeper negative effects on the Philippine economy."

Last year, the central bank cut interest rates by a cumulative 200 basis points to help shore up the economy amid the disruptions of the COVID-19 pandemic.

Gross domestic product grew 11.8 percent in the second quarter year-on-year, partly due to low base effects from last year's record 17 percent contraction. However, on a seasonally adjusted quarter-on-quarter basis, the economy shrank 1.3 percent.

The government is targeting a growth rate of 6 to 7 percent this year.

• Fitch Solutions downgrades PH growth outlook amid low vaccination rate

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