IMF urges BSP: Keep interest rates ‘sufficiently’ high as inflation risks persist

October 4, 2024
7:05AM PHT

The International Monetary Fund (IMF) has recommended that the Bangko Sentral ng Pilipinas (BSP) maintain its restrictive monetary policy to fight inflation, despite projections of easing price increases in 2024.

The statement from the multilateral lender came at the end of its regular staff visit to the Philippines where it met with government economic officials to review the country’s performance.

“The BSP should continue to maintain a sufficiently restrictive policy stance to firmly anchor inflation expectations,” the IMF said.

Following a cumulative 450 basis points rate hike since 2022, the BSP reduced last August its key interest rate by 25 basis points — on which banks base their own lending rates — to 6.25 percent, noting that inflation risks were on the wane.

The IMF’s latest outlook expects inflation to decline to 3.4 percent in 2024, down from its peak of 6 percent in 2023.

However, “risks to inflation remain to the upside, stemming from geopolitical tensions and recurrent commodity price volatility,” it said. 

The IMF team, led by Elif Arbatli Saxegaard, emphasized that inflation risks must be managed to ensure long-term economic stability.

The Philippine economy is projected to grow by 6 percent in 2024, driven by stronger domestic demand, public and private investment, and a recovery in exports.

The IMF also noted that efforts to attract foreign direct investment and promote business-friendly reforms will be crucial to sustaining this growth. 

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