The Monetary Board on Thursday decided to maintain the BSP’s Target Reverse Repurchase (RRP) Rate at 6.5 percent. The interest rates on the overnight deposit and lending facilities will remain at 6 percent and 7 percent, respectively.

This is the highest interest rate since 2007. Policy rates were raised to enable the government to combat inflation, which was at 3.9 percent in May and in the upper level of the 2024 goal of 3 to 4 percent.

The balance of risks to the inflation outlook has shifted to the downside for 2024 and 2025 due largely to the impact of lower import tariffs on rice under Executive Order 62.

Nonetheless, higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation.

Inflation is moving closer to the midpoint of the 2 ? 4 percent target range. The risk-adjusted inflation forecasts have eased to 3.1 percent for both 2024 and 2025 from 3.8 percent and from 3.7 percent, respectively.

Based on the BSP’s latest survey of market forecasters, inflation expectations remain well-anchored.

Meanwhile, prospects for domestic output growth remain in line with medium-term trends amid favorable labor market conditions and strong net exports.

On balance, the Monetary Board deems it appropriate to hold monetary policy settings steady at this time.

The Monetary Board also anticipates price pressures to ease further in the second half of the year with the implementation of EO 62 as well as Administrative Order 20.

If sustained, an improvement in the inflation outlook would allow more scope to consider a less restrictive monetary policy stance. However, uncertainty in the external environment calls for some caution against potential spillovers, including those in the financial markets. BSP