Monetary Policy Report May 2023
Monetary Policy Summary
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At its monetary policy meeting on 18 May 2023, the BSP decided to keep the
interest rate on the overnight reverse repurchase (RRP) facility at 6.25
percent. Accordingly, the interest rates on the overnight deposit and lending
facilities are likewise maintained at 5.75 percent and 6.75 percent, respectively.
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Economic Outlook
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The latest baseline forecasts indicate a still-elevated path in the coming
months with inflation estimated to average at 5.5 percent for 2023 and at 2.8
percent for 2024. Nonetheless, the forecasts are lower relative to the previous
round by 0.6 ppt for 2023 and 0.3 ppt for 2024. The downward revision for 2023
mainly reflects the lower-than-expected inflation outturns in March and April, the
slower domestic and global growth outlook, as well as the impact of the
cumulative 75-bp BSP policy rate increases in Q1 2023. Lower crude oil prices and
the peso appreciation also contributed to the declining inflation path for 2024,
but their impact was offset by positive base effects following the successive
negative month-on-month inflation prints in early 2023.
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Current Developments
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Headline inflation slows further in April 2023. Inflation slowed to 6.6 percent in
April 2023 from 7.6 percent a month ago. This brought the year-to-date average
to 7.9 percent which is above the National Government’s average inflation target
range of 2.0-4.0 percent for the year. Inflation for the heavily weighted food and
non-alcoholic beverages decelerated to 7.9 percent due to improvements in
supply conditions. Non-food inflation also moderated, driven by lower transport
inflation which declined to 2.6 percent.
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Summary of MP Decisions
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