MANILA - The Bangko Sentral ng Pilipinas on Thursday kept the benchmark policy rate steady at 2 percent.
This was the 7th consecutive policy meeting that the BSP kept the benchmark interest rate at a record low as the BSP reaffirmed its commitment to remain "accommodative" to support the economy during the pandemic.
BSP Governor Benjamin Diokno earlier said that the move to tighten the key policy rate and to reduce the reserve requirement is "not the right thing to do" as of this time.
Inflation outlook for the rest of the year is tilted to the upside due to several factors including mobility restrictions brought by the new COVID-19 Delta variant, Diokno said.
Vaccination and the recalibration of containment measures are "crucial in supporting economic activity while safeguarding public health and welfare," Diokno said.
“To balance, the Monetary Board is of the view that prevailing monetary policy settings remain appropriate given the manageable inflation environment and uncertain growth outlook,” Diokno added.
Inflation outlook for 2021 was also revised upward to 4.4 percent from 4.1 percent, 3.3 percent from 3.1 percent in 2022 and 3.2 percent from 3.1 percent in 2023, BSP Deputy Gov. Francisco Dakila said.
A higher than expected August inflation due to weather disturbances, higher prices of several basic goods, higher electricity rates in Meralco serviced areas, elevated pork prices, the uptick in local oil prices and the impact of typhoons were cited for the revision in the inflation outlook, Dakila said.
Inflation accelerated to 4.9 percent in August from 4 percent in July. Diokno earlier said the accelerated inflation numbers were "transitory."
Given the environment, a 5 percent inflation rate is possible in September, Dakila said.
Despite the positive economic growth in the second quarter and the progress in the country's COVID-19 vaccination plan, the BSP said the new Delta variant could pose risks to recovery.
Economic growth hit 11.8 percent in the second quarter following a contraction of 3.9 percent in the first quarter.
The high growth figure in Q2 takes into account the low base effects, as the economy contracted by a record 17 percent in the same period last year.
Other central banks have hinted they will soon start raising interest rates as economic recovery in their respective countries gather pace. Many are taking their cue from the US Federal Reserve which is expected to "soon" taper off its monetary stimulus.