MANILA - The Bangko Sentral ng Pilipinas on Thursday said the Monetary Board has decided to keep interest rate at its record low of 2 percent.

The central bank has kept the benchmark borrowing rate at its current level for a year to support economic recovery despite the threat of rising inflation.

Although inflation hovered above the government target of 2 to 4 percent, it recorded a 4-month low of 4.2 percent in November, data showed.

• Inflation eases to 4.2 percent in November

The Monetary Board on Thursday also revised upwards its inflation outlook for 2021 and 2022.

The BSP said its inflation forecast was raised to 4.4 percent for 2021, from the previous forecast of 4.3 percent. For 2022, it was revised to 3.4 percent from 3.3 percent.

Meanwhile, the 2023 inflation forecast was maintained at 3.2 percent.

BSP Governor Benjamin Diokno earlier said inflation could settle back within the target by 2022. The BSP kept the target range of 2 to 4 percent until 2024.

"The projected inflation path remains within the inflation target band of 2-4 percent over the policy horizon. Average inflation is seen to settle close to the midpoint of the target range in 2023. Inflation expectations also continue to be anchored to the target level," he said.

Diokno said the emergence of the new COVID-19 omicron variant "continues to pose downside risks to the outlook for growth and inflation."

"Nonetheless, the Monetary Board observed that economic growth now appears to be on firmer ground, supported by the Government’s accelerated vaccination program and calibrated relaxation of quarantine protocols," he added.

The Philippines, which has recorded more than 2.83 million COVID-19 cases, has fully vaccinated more than half of its high-end target of 77.1 million people.

Some central banks around the world have started to tighten monetary policies to arrest inflation. But Diokno said the Philippines' current policy remains adequate.

The country also has hefty dollar reserves to cushion the impact of any action by the US Federal Reserve, the BSP earlier said.

Any Fed action is also incorporated into the projected inflation path, Deputy Governor Francisco Dakila said during Thursday's briefing.

The US Fed might implement 3 rate hikes in 2022 to fight inflation, Fed Chair Jerome Powell signaled on Wednesday.

-- with a report from Reuters

• US Fed signals 3 rate hikes in the cards in 2022 as inflation fight begins
• Hefty reserves to shield Philippines from US Fed actions: BSP
• Delta variant spread could delay Fed policy shift: BSP chief

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