MANILA -- The Bangko Sentral ng Pilipinas (BSP) on Thursday again kept the country’s benchmark target reverse repurchase rate (RRP) steady in its final meeting of the year.

BSP Governor Eli Remolona said the RRP, which banks use to price loans, is still at 6.5 percent.

This followed the US Federal Reserve's announcement earlier that it was keeping rates steady for the third straight meeting and signaled that they expect to make rate cuts next year.

In late October, the BSP made an off-cycle 25 basis points rate hike in a bid to tame inflation, which had quickened in August and September.

Inflation, however, eased to 4.1 percent in November amid slower increases in food prices, and lower transport costs allowing the central bank to pause rate adjustments.

• Inflation slows to 4.1 percent in November
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Senior Assistant Governor Iluminada Sicat said the BSP expects inflation to return to its 2 to 4 percent target range in the first quarter of 2024 due to base effects.

"(It) could temporarily accelerate above the target from April to July due to the impact of El Nino weather conditions. Also the lag impact of minimum wage adjustments in 2023 as well as the positive base effects."

"Subsequently, inflation is projected to return to target in Q3 2024 and settle near the midpoint of the target in Q4 2024 owing to the decline in world oil prices," she said.

The BSP noted, however, that risk-adjusted inflation forecasts remain above the target for 2024 at 4.2 percent, but were lower than the 4.4 percent outlook in its previous meeting in November.

For 2025 the forecast is still at 3.4 percent.

The BSP said several factors--like higher transport charges, oil prices, and electricity rates--could still speed up inflation.

"Meanwhile, the impact of a relatively weak global recovery as well as government measures to mitigate the effects of El Nino could reduce the central forecast," the BSP said.

The Monetary Board also noted that previous policy tightening measures have to continue to work their way through the economy, as can be seen in the declining path for core inflation.

"With all the recent information, the Monetary Board continues to see the need to keep monetary policy settings sufficiently tight to allow inflation expectations to settle more firmly within the target range," the BSP said.

"In the coming quarters, the national government’s non-monetary interventions will remain crucial to sustain the disinflation process," the central bank added.

Going forward, the BSP said it remains ready to adjust monetary policy settings as needed.