MANILA, Philippines – The Bangko Sentral ng Pilipinas decided yesterday to keep its key policy rates steady amid a manageable inflation environment.
The BSP’s overnight borrowing and lending rates were maintained at 3.5 percent and 5.5 percent, respectively.
Interest rates on special deposit accounts facility and the reserve requirement ratios were also left unchanged.
“The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable,” BSP Governor Amando M. Tetangco Jr. said in a briefing.
The country’s average inflation rate of 2.8 percent for the first 11 months of the year was still below the BSP’s full-year target range of three to five percent.
“While inflation forecasts have slightly risen due to the recent increase in global oil prices, utility rate adjustments, and the impact of the recent typhoons, the future inflation path continues to be within the target over the policy horizon since the uptick is expected to be largely transitory,” he added.
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“Market expectations of inflation remain consistent with the target range,” he added.
The Monetary Board expects inflation to average 2.9 percent this year, slightly below its previous forecast of three percent announced in October.
But the central bank hiked its 2014 inflation forecast to 4.5 percent from four percent on the back of higher oil prices, power adjustments and the impact of recent natural calamities.
The 2015 inflation forecast, meanwhile, has been downgraded to 3.2 percent from 3.4 percent.
The Monetary Board is mindful that the balance of risks to the inflation outlook is still weighted toward the upside given the potential increases in food prices as well as the pending petitions for further adjustments in utility rates,” Tetangco said.
The BSP said supply shocks resulting from recent typhoons and the expected increase in power rates such as Yolanda and Maring may cause spikes in domestic inflation.
“At the same time, the Monetary Board pays close attention to the evolving economic growth and liquidity dynamics and their implications for price and financial stability,” Tetangco said.
