BSP keeps policy rates unchanged

MANILA, Philippines - The Bangko Sentral ng Pilipinas decided yesterday to keep its key policy rates unchanged for the fourth consecutive meeting as inflation expectations continued to fall within the target banks for this year until the next.

BSP Deputy Governor Diwa C. Guinigundo said the overnight borrowing and overnight lending rates were kept at four percent and six percent, respectively.

The interest rates on the reverse repurchase, repurchase, and the special deposit account facility and the reserve requirement ratios were also maintained.

“The Monetary Board’s decision is based on its assessment that the inflation environment continues to be manageable,” Guinigundo said.

The central bank has downgraded its forecast for average inflation this year to 2.2 percent from 2.3 percent, while keeping its 2.5-percent estimate for average inflation in 2016.

The lower forecast was amid the lesser-than-estimated minimum wage adjustment announced earlier this month, Guinigundo said.

“The risks to inflation outlook continue to be broadly balanced, with upside risks emanating from pending petitions for adjustments in utility rates and possible power shortages,” Guinigundo said.

“Meanwhile, global economic activity has turned slightly more positive but continues to be uneven, which could further mitigate upward pressures on commodity prices,” he continued.

Guinigundo stressed that domestic demand remains strong due to sustained private demand, sufficient domestic liquidity, and positive business sentiment. The government’s commitment to the acceleration of public spending is also seen to support economic growth.

“Given these considerations, the Monetary Board is of the view that current monetary policy settings remain appropriate,” Guinigundo said.

“Going forward, the BSP will continue to monitor domestic and external developments affecting the inflation outlook to ensure that the monetary policy stance remains consistent with its price and financial stability objectives,” he added.

Last year, the central bank hiked the key policy rates by a total of 50 basis points to ensure inflation would settle within the two to four target ranges for this year until 2016. The reserve requirement ratios and the special deposit account rate were also raised last year to pull down excessive liquidity growth.