BSP rates stable until 2023 on ‘transitory’ inflation.

The Bangko Sentral ng Pilipinas (BSP) has announced that it will maintain its current interest rates until 2023, citing the current inflation as “transitory.”

The BSP’s Monetary Board has decided to keep the overnight reverse repurchase rate at 2%, the overnight deposit rate at 1.5%, and the overnight lending rate at 2.5%. This decision was made despite the recent uptick in inflation, which reached 4.5% in March 2021.

According to the BSP, the recent increase in inflation is due to supply-side factors such as higher food and oil prices, as well as the impact of the African swine fever on pork prices. The BSP expects inflation to remain elevated in the coming months but to gradually ease back to within its target range of 2-4% by 2022.

The BSP’s decision to keep rates stable until 2023 is aimed at supporting the country’s economic recovery from the COVID-19 pandemic. The BSP believes that maintaining accommodative monetary policy will help boost consumer and business confidence, encourage lending, and support economic growth.

The BSP’s decision has been welcomed by economists and business leaders, who see it as a positive sign for the country’s economic prospects. However, some analysts have expressed concern that the BSP’s decision could lead to higher inflation in the long run if the current supply-side pressures persist.

Despite these concerns, the BSP remains confident that its current policy stance is appropriate given the current economic conditions. The BSP has also emphasized that it stands ready to adjust its policy stance if necessary to ensure price stability and support sustainable economic growth.

In conclusion, the BSP’s decision to keep rates stable until 2023 on “transitory” inflation is a positive development for the Philippine economy. While there are risks associated with this decision, the BSP’s commitment to supporting economic recovery and maintaining price stability should help to mitigate these risks. As the country continues to navigate the challenges of the COVID-19 pandemic, the BSP’s prudent monetary policy will be an important tool for ensuring a strong and sustainable recovery.