BSP keeps key policy rate at record low 2% to support recovery

The Bangko Sentral ng Pilipinas (BSP) has maintained its key policy rate at a record low of 2 percent to bolster the country's economic recovery amidst a surge in COVID-19 cases.

The overnight deposit and lending facilities rates were also kept steady at 1.5 percent and 2.5 percent, respectively.

This decision aligns with economists' expectations, who predict the BSP will hold rates unchanged for the fourth consecutive meeting.

Despite inflation exceeding the target range, BSP Governor Benjamin Diokno anticipates it will return within the 2-4 percent band in 2021 and 2022.

The central bank expects continued economic recovery, supported by government fiscal measures, the ongoing vaccination program, and improved international prospects.

However, the recent GDP data, which showed the economy shrinking by 4.2% in the first quarter, and continued risk aversion dampen confidence and pose significant risks to demand, leading to the decision to maintain steady monetary policy.