MANILA, Philippines — The Bangko Sentral ng Pilipinas on Thursday left key rates unchanged, defying calls from market watchers to adjust monetary policy settings to temper building price pressures.
At their second rate-setting meeting for this year, members of the BSP’s Monetary Board kept the overnight reverse repurchase rate at record-low 3.0 percent. Corresponding rates on overnight lending and deposit facilities were also untouched.
Policy setting has remained unchanged since the central bank hiked rates by 25 basis points in September 2014.
“The Monetary Board considered that prospects for domestic activity continue to be firm on the back of robust domestic demand, strong growth in credit and liquidity, and a sustained recovery in global economic growth,” the BSP said in a press statement.
The central bank had repeatedly sought to douse growing rate hike expectations, saying rising inflation stoked by a new tax law that slapped higher excise levies on fuel, sugary drinks and cigarettes, among others, is “temporary.”
The BSP had also stressed it won’t necessarily react to one month’s data after inflation accelerated to its fastest pace in over three years last February, noting a “long lag” between tweaking benchmark interest rate and its impact on the financial system.
Inflation estimates revised
The central bank also on Thursday announced its revised inflation forecast using the new base year of 2012.
The monetary authority now projects inflation to average 3.9 percent this year and moderate to 3 percent in 2019, within the government’s 2-4 percent target band.
The BSP also expects rice tariffs, unconditional cash transfers and transport subsidies to mitigate the uptick in consumer prices.
But the central bank said it would remain “watchful” against inflation risks broadening out in the economy, and vowed to “take immediate and appropriate measures” to ensure price and financial stability.
“If the data shows there is basis to move, the monetary board will not wait,” Governor Nestor Espenilla said.
Headline inflation, as calculated on a rebased index, quickened to 3.9 percent last month, faster than January’s 3.4 percent print and was the highest since August 2014.
Meanwhile, the economy has been growing above 6 percent while the Philippine peso continues to depreciate against the dollar.