The timely increase in the key policy rate, based on the latest outlook on inflation and economic growth, is expected to help slow down further price increases from second-round effects and manage inflation expectations.
This decision is based on the BSP’s assessment that inflation could be higher than the previous estimates in March as inflation pressures continue to persist. The timely increase in the BSP’s policy interest rate is expected to temper further second-round effects on transport fares, food prices, and wage increases, among others, and manage inflation expectations. Meanwhile, the BSP likewise emphasizes its support for the sustained implementation of non-monetary interventions such as ensuring adequate food supply to lessen the impact of persistent supply-side factors on inflation.
The strong economic activity and improved labor conditions provide scope for the BSP to roll back its pandemic-induced interventions including the reduced provisional advances to the National Government which will be settled on 20 May 2022.
Given ample liquidity, a gradual recovery in credit activity, and stable financial market conditions, the BSP has decided to reconfigure the government securities (GS) purchasing window from a crisis intervention measure into a regular liquidity facility under the interest rate corridor framework.
Looking ahead, the pace and timing of further monetary policy actions by the BSP shall be guided by data outcomes, in keeping with the BSP’s price and financial stability objectives.
