Still on pause

PHILIPPINES - In Brief 17 Aug 2023 by Romeo Bernardo
As expected, the Monetary Board maintained policy settings for the third time, keeping the key overnight rate at 6.25%. In his first policy press conference, BSP Governor Eli Remolona reiterated that the authorities remain prepared to resume tightening if the need arises. After tweaking downwards inflation forecasts in June, the BSP now expects a higher path for inflation reflecting mainly the recent increase in crude oil prices. The new set of forecasts are: 5.6% in 2023, 3.3% in 2024 and 3.4% in 2025. The Governor further noted that risks remain on the upside reflecting food supply constraints, possible higher wage and transport fare adjustments and effects of El Nino on food prices and power rates. Per BSP officials, factored into the latest forecasts are slower economic growth expectations following the lower-than-expected 2Q GDP growth. Asked whether the BSP will respond to the growth slowdown, Governor Remolona observed that the 2Q slowdown was due to special factors rather than monetary tightening and that interest rates are “low enough to not be a factor to growth.”

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