MONETARY authorities on Thursday decided to keep key interest rates unchanged ahead of next month’s scheduled policy meeting, citing economic uncertainties and hinting of further off-cycle actions.
The BSP’s policymaking Monetary Board, which was supposed to meet on April 23 and expected by some analysts to end an easing cycle in response to heightened inflationary risks, retained the benchmark rate at 4.25 percent.
“Data-driven central banks have been paying close attention in a fast-changing and uncertain environment resulting from the conflict in the Middle East,” Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. told reporters.
“We judged that an off-cycle policy meeting was called for.”
The Monetary Board saw near-term upside risks to inflation as “largely supply-driven, for which monetary policy has limited effectiveness,” the BSP said in a statement.
With economic growth remaining weak, meanwhile, raising interest rates “at this time would delay the recovery,” it added.
“Amid the uncertainty, the BSP will continue to assess how these developments will impact inflation and growth dynamics.”
The last time the central bank held an unscheduled meeting was in October 2023, when it delivered an off-cycle rate hike to address surging inflation.
On Thursday, Remolona said further off-cycle meetings could be held “as needed.”
“We kept the policy rate steady today because we forecast headline inflation would move back toward the tolerance range by 2027 and inflation expectations remain well anchored,” he said.
“At the same time, weak aggregate demand would help prevent inflation from rising even further.”
The central bank raised its inflation projection for this year and next year to 5.1 percent and 3.8 percent, respectively, from 3.6 percent and 3.2 percent.
“Monetary policy will focus on addressing likely second-round effects of the oil price shocks,” Remolona said.
“For that, we will remain vigilant, we will be guided by data, and we will act as needed to pursue our primary mandate,” he added.
BSP Deputy Governor Zeno Ronald Abenoja said the effects of rising oil prices were likely to be felt more strongly in the second half of the year, potentially driving inflation higher.
“We think by the second half of this year, we can really start seeing the impact of the oil prices and some of the spillovers of the oil prices to other commodity prices,” Abenoja said.
“We remain watchful. We are closely watching all developments, very vigilant on what’s happening in both international markets as well as the domestic markets.”
BSP Monetary Policy Sub-Sector director Dennis Lapid said inflation for March could be around 3.5 percent and that April could see even higher levels, potentially rising as much as 5 percent.
“Looking ahead, mounting risks to inflation will require sustained vigilance. Monetary policy will focus on addressing likely second-round effects that may arise,” the central bank said.
“The Monetary Board will act as needed in pursuit of the BSP’s primary mandate to maintain price stability.”