(Feb 15): The Philippine central bank left its key interest rate unchanged for a third straight meeting, as policymakers kept their guard even after judging consumer price risks to be receding.

The Bangko Sentral ng Pilipinas (BSP) maintained the target rate at 6.50%, as seen by all 20 economists surveyed by Bloomberg. The decision keeps borrowing costs at a nearly 17-year high following 450 basis-points of hikes since May 2022 to return inflation to the central bank’s 2% to 4% target range.

“The risks to the inflation outlook have receded but remain tilted towards the upside,” the BSP said in a statement released on Thursday. The board, which met on Wednesday, deemed it “appropriate to keep policy settings unchanged in the near term”, it said.

The peso held on to its gain after the announcement, rising 0.2% to 55.98 against the dollar. Higher-for-longer rates may help bolster support for the currency, which has fallen 1% this year.

While inflation moderating to a three-year low of 2.8% in January has bolstered bets that the central bank is near the start of easing rates, the BSP kept from giving any guidance on when it might do so. Policymakers have signalled the need to be vigilant about inflationary pressures from costlier food because of El Niño, and higher transport and electricity prices.

Governor Eli Remolona had previously flagged that a rate cut is possible “within the year” but unlikely for it to happen in the first half.

El Niño could limit farm output growth while a resurgence of oil price hikes could threaten the overall prices in a country that’s one of the world’s biggest buyers of rice and imports almost all of its fuel needs.

Meantime, the central bank sees a deal with Vietnam for rice imports as encouraging, as it lowered its risk-adjusted inflation outlook for 2024 to 3.9% from 4.2% seen previously.

The BSP also pencilled in the possibility of activity in the Philippines, currently Southeast Asia’s fastest-growing economy, moderating, and said it stands ready to adjust policy settings as needed.

The Philippine economy expanded 5.6% in 2023, missing the government’s 6% to 7% target but that pace was the region’s quickest.