"There are no inflationary pressures, prices are stable and the exchange rate is also stable," said BSP Deputy Governor Amando Tetangco Jr.
The forecast range is wider than the 3.7 to 3.9 percent range earlier projected by BSP Governor Rafael Buenaventura and the four percent estimate of Socioeconomic Planning Secretary Dante Canlas.
Tetangco added the Monetary Board of the central bank will assess its policy rates this week if the US Federal Reserve pushes through with its plan to adjust its own key rates today.
"We will assess the overnight rates based on what the US Fed is going to do. And, of course, we have to also look at the inflation outlook to make sure that the inflation situation will be consistent with whatever action the Monetary Board might take," Tetangco said.
Earlier, Buenaventura said this month’s inflation level could even be lower than December’s 3.9 percent, giving monetary authorities more room for monetary easing and cutting of key rates.
He added that the MB can still reduce the central bank’s overnight interest rates, possibly by 50 to 100 basis points if the government lowers its full-year inflation target to four to five percent from the original projection of five to six percent.
On the other hand, Canlas said the country’s economic managers could revise the inflation target, especially if stable food and oil prices are sustained.
The BSP relies on inflation and other leading indicators in setting the closely watched overnight borrowing and lending rates of the BSP.
The MB last brought down the rates to 7.75 percent from borrowing and to 9.75 percent for lending. – Rocel Felix