The Bangko Sentral ng Pilipinas (BSP) kept its key interest rates at a record low on Thursday, as monetary authorities expect average inflation to return to target this year.

The overnight borrowing, lending, and deposit rates were all held at 2.00 percent, 1.50 percent, and 2.50 percent, respectively.

In a virtual briefing, BSP Governor Benjamin Diokno said the “latest inflation projections suggest that inflation is likely to settle within the target range in 2021 and 2022.”

Inflation is expected to slow slightly in 2021, averaging near the upper end of the target range, as price pressures on food commodities ease due to improved weather conditions, the impact of Executive Order (EO) 128 and Proclamation 133, and the impact of non-monetary direct steps to alleviate supply constraints, according to him.

EO 128 permits the importation of increased volume of pork products at lower tariffs while Proclamation 133 places the entire country under a state of calamity due to the African swine fever (ASF).

BSP Deputy Governor Francisco Dakila Jr., meanwhile, announced that the central bank cut its inflation forecast for this year from 4.2 percent to 3.9 percent. The outlook for 2022 has been raised to 3 percent from 2.8 percent.

The effect of lower tariffs on imported pork, lower-than-expected inflation in March and April, and the impact of the first quarter gross domestic product outturn, Dakila said.

Last month, a slower rise in food and non-alcoholic beverage prices held the country’s headline inflation rate at 4.5 percent, taking the average figure for the first four months of the year to 4.5 percent.

The economy, on the other hand, continued to contract in the first quarter of this year, easing by 4.2 percent.

“The risks to the inflation outlook are also broadly balanced. The Monetary Board emphasizes that the timely implementation of approved non-monetary measures will be crucial in mitigating further supply-side pressures on meat prices and inflation,” Diokno, for his part, said.

The Monetary Board, Diokno added, expects the domestic economy to strengthen further in the coming months, aided by the government’s targeted fiscal policies and the continuation of its vaccination program.

He further said that better foreign prospects should help fuel domestic economic activity.