KONTAN.CO.ID - MANILA. The Philippine central bank left key interest rates steady on Thursday to shore up a domestic economy facing risks from global uncertainties, but it raised inflation forecasts and highlighted its readiness to temper increasing price pressures.

The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0% for an eleventh straight policy meeting, as predicted by all 17 economists in a March 15-21 Reuters poll.

The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5% and 2.5%, respectively.

"The Monetary Board sees scope to maintain the BSP's policy settings in order to safeguard the momentum of economic recovery amid increased uncertainty, even as it continues to develop its plans for the gradual normalisation of its extraordinary liquidity measures," BSP Governor Benjamin Diokno said.

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The Philippine peso was little changed by 0715 GMT, following the BSP's decision. The country's main share index was up 1%.

Average inflation could breach the upper end of the 2%-4% target range in 2022 by reaching 4.3%, higher than the February forecast of 3.7%, Diokno said.

For 2023, average inflation was seen at 3.6%, higher than the previous projection of 3.3%.

Inflation held steady at a 16-month low of 3% in February as higher energy costs were offset by lower prices of some food items.

But the impact of high commodity prices, following Russia's invasion of Ukraine, has been significantly felt in the Philippines - a net oil importer - triggering petitions from labour groups for higher wages and from transport groups to increase fares. The government has been prompted to provide financial assistance to the hardest-hit sectors.

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Diokno said on March 17 the BSP did not have to move in step with the monetary policy adjustments of the U.S. Federal Reserve, which has begun raising rates to counter risks from high inflation.

The BSP was expected to hike rates by 50 basis points in the last quarter of the year to 2.50%, according to the March 15-21 poll, matching predictions in a Reuters survey in February.

But a significant minority of economists - eight of 17 - pencilled in a hike in the third quarter.

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Editor: Wahyu T.Rahmawati