Daily TribuneThe BSP raises its policy rate mainly to prevent spikes in prices of goods and services by restraining consumer demand
The Bangko Sentral ng Pilipinas
Photograph courtesy of Bangko Sentral ng Pilipinas
The Bangko Sentral ng Pilipinas (BSP) maintained its policy rate at 6.5 percent on Thursday due to projections of rice prices pushing lower.
Accordingly, the interest rate on the overnight deposit stays at 6 percent and lending facilities at 7 percent.
BSP Governor Eli Remolona Jr. said inflation risks are now on the “downside,” reflecting a lower risk-adjusted inflation forecast for this year to 3.1 percent from 3.8 percent.
For 2025, the BSP expects the same level which is lower than the 3.7 percent previous estimate.
The BSP raises its policy rate mainly to prevent spikes in prices of goods and services by restraining consumer demand.
The steady rate is due largely to the impact of lower import tariffs on rice under Executive Order 62.
“Nonetheless, higher prices of food items other than rice, transport charges, and electricity rates continue to pose upside risks to inflation,” Remolona said.
Early this month, President Ferdinand “Bongbong” Marcos Jr. approved the rice tariff reduction from 35 percent to 15 percent to lower rice prices to P29 per kilo for poor households.
BSP Senior Assistant Governor Iluminada Sicat said the tariff rate will help overall inflation decline by 12 basis points and the rice prices by 14.8 percent over 12 months.
Remolona cautioned that non-monetary agencies of the government must still ensure enough supply of other food and non-food items to stabilize overall prices within the BSP’s target of 2 to 4 percent.
Remolona cautioned that non-monetary agencies of the government must still ensure enough supply of other food and non-food items to stabilize overall prices within the BSP’s target of 2 to 4 percent.
These include corn, pork, and crude oil. Sicat said risks of higher oil prices stem from the persisting tensions between Israel and Hamas, a Palestinian rebel group, while transport rates are now higher for motorists passing the North Luzon Expressway.
Peso-US dollar effect
Regarding the effect of a weaker peso on inflation, Remolona said it has been minimal while stressing that the BSP intervenes in the foreign exchange occasionally.
“That means if there’s only one side that is buying or selling. Mostly, we come in to slow down the tendency of the peso to move sharply,” he said.
