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Philippines Monetary Policy September 2021

Philippines: Central Bank keeps rates unchanged in September

At its monetary policy meeting on 22 September, the Central Bank of the Philippines maintained the overnight reverse repurchase facility rate at its record low of 2.00%, marking the seventh successive hold and matching market analysts’ expectations. Likewise, the overnight deposit facility and the overnight lending facility rates—which establish the floor and the ceiling of the interest rate corridor—were left at 1.50% and 2.50%, respectively. The Bank raised its inflation forecasts again due to rising commodity prices. However, inflation expectations remain anchored, and the Bank sees inflation falling to 3.0% in the medium run, and thus within its 2.0%–4.0% target band. Meanwhile, a low vaccination rate poses a serious downside risk to the outlook ahead. The combination of an uncertain economic outlook and manageable inflation projections pushed the Bank to retain its accommodative monetary stance.

The Bank’s communiqué did not give explicit forward guidance and sounded a similar tone to the previous month, saying that the Bank will “closely monitor” risks to the inflation outlook, and that it will take “appropriate measures as necessary” to fulfill its price and financial stability mandates. All panelists see the policy rate remaining unchanged at 2.00% for the rest of the year. For 2022, panelists are broadly split, with some seeing rates unchanged and others expecting hikes.

The next policy meeting is scheduled for 18 November.

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