BSP Raises Inflation Forecast but Keeps Rates Unchanged

The Bangko Sentral ng Pilipinas (BSP) raised its inflation projections for 2021 to 4.2%, above the government's target range of 2-4%. This adjustment is due to supply-side pressures, including the African swine fever and higher international oil prices.

Despite these risks, the BSP kept its key interest rates unchanged at record lows: overnight reverse repurchase rate at 2%, overnight lending rate at 2.5%, and overnight deposit rate at 1.5%. The central bank emphasized that timely non-monetary interventions are crucial to mitigate supply-side pressures and prevent second-round effects on inflation.

BSP Governor Benjamin Diokno noted that while global economic activity has improved, the pandemic remains a downside risk due to its impact on domestic demand.