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* BSP keeps the RRP rate at an all-time low of 2.0%
* BSP says risks to inflation are ‘broadly balanced’
* BSP forecasts 2021 inflation at 4%, cuts 2022 forecast (adds quotes, inflation forecasts, background)
MANILA, Feb 11 (Reuters) – The Philippine central bank kept its monetary policy stable on Thursday to support the pandemic-stricken country’s economy, and said inflation is expected to remain high but manageable in the coming months.
The Bangko Sentral ng Pilipinas (BSP) maintained its overnight reverse repurchase facility rate at an all-time low of 2.0%, in line with market expectations.
Likewise, the rates on lines of credit and demand deposits remained at 1.5% and 2.5%, respectively.
Risks to the inflation outlook appear to be “broadly balanced,” BSP Governor Benjamin Diokno said.
“A reduced supply of meat products due in part to the outbreak of African swine fever in the country could create further upward pressure on inflation,” he said.
“However, the ongoing pandemic may continue to pose downside risks to demand and the inflation outlook.”
The BSP now forecasts that this year’s average inflation will be at the upper end of its target range of 2% -4%, from 3.2% previously.
But it lowered its inflation forecast for next year to 2.7% from 2.9%, well within the same target range.
“The manageable inflation outlook continues to allow the BSP to maintain an accommodative policy stance,” Diokno said.
Inflation hit a two-year high of 4.2% in January due to meat and vegetable supply restrictions.
Some economists have ruled out further easing of the policy this year, while others have raised the possibility of a rate hike.
The BSP cut rates by 200 basis points accumulated last year, at a time when the economy experienced its worst contraction on record due to the pandemic.
Despite an unprecedented easing policy by the BSP that included the massive purchase of government securities, banks have been risk averse in granting loans.
Bank lending fell for the first time in more than 14 years in December, reflecting weakness in business and consumer activity.
Reporting by Neil Jerome Morales, Enrico Dela Cruz and Karen Lema, Editing by Martin Petty and Hugh Lawson
