BSP's Monetary Board retains interest rates at 6.5% in Philippines

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The Bangko Sentral ng Pilipinas' (BSP) Monetary Board (MB) has left interest rates untouched, the central bank announced on Thursday.

This means that the target reverse repurchase rate hast been retained at 6.5%, the sixth time since its off-cycle policy rate hike in October 2023 to mitigate supply-side inflation pressures.

However, according to BSP Gov. Eli Remolona, the inflation risks are now tilted downside due to reduction of rice tariffs.

'The balance of risks and inflation output has shifted to the downside for 2024 and 2025,' Remolona said.

The reduction of rice tariffs is due to the Executive Order (E.O.) No. 62 signed by President Ferdinand Marcos Jr. last June 20.

The E.O. mandates the modification of nomenclature and tariff rates on various products to 'ensure continuous supply of goods and to protect the purchasing power of the Filipino people.'

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

In a separate press release, the BSP also pointed out that inflation is approaching the midpoint of the 2% to 4% target range.

Risk-adjusted inflation forecasts have decreased to 3.1% for both 2024 and 2025, down from 3.8% and 3.7% respectively, according to the BSP.

With the MB's retention, interest rates on overnight deposit and lending facilities also remained unchanged at 6.0% and 7.0%, respectively.

The country's main policy rates are at their highest level in over 17 years, following the BSP's vigorous rate-hike by 450 basis points from May 2022 to October 2023.