The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0% for the seventh straight policy meeting, as widely expected in a Reuters poll, even as it increased its inflation forecasts for this year, 2022 and 2023.
The rates on the overnight deposit and lending facilities were kept at 1.5% and 2.5%, respectively.
BSP Governor Benjamin Diokno told a news briefing policy settings remained appropriate, with inflation pressures still manageable and the growth outlook uncertain. Inflation is running above the central bank's 2%-4% target range.
"The outlook for recovery continues to hinge on timely measures to prevent deeper negative effects on the Philippine economy," he said.
The Philippine economy came out of a recession https://www.reuters.com/article/philippines-economy-gdp-idUSL1N2PH04H in the second quarter but the reimposition of strict lockdown measures https://www.reuters.com/world/asia-pacific/philippines-detects-first-local-transmission-delta-variant-2021-07-16 from July to mid-September has clouded the outlook.
Indeed, the government cut its 2021 growth target in August to 4.0% to 5.0%, from 6.0% to 7.0% previously.
Some of those curbs have since been eased, with the Manila capital region shifting away from wide-scale lockdowns to localised ones from Sept. 16 as it tries to contain the virus while allowing some businesses to resume operations.
"The economy remains very weak, which suggests policy will need to remain loose for some time," said Alex Holmes, an economist at Capital Economics.
He expected no further rate cuts but also believed the BSP would not raise rates until 2023 despite elevated inflation, which accelerated to 4.9% in August, its highest in nearly three years.
The BSP raised its average inflation forecasts to 4.4% from 4.1% for this year, 3.3% from 3.1% for 2022, and 3.2% from 3.1% for 2023.
(Writing by Enrico Dela Cruz; Editing by Ana Nicolaci da Costa and Giles Elgood)
By Neil Jerome Morales and Karen Lema
