BSP keeps rates unchanged amid low inflation
Tetangco warns of upside price risks going forwardBy Ronnel W. Domingo
Philippine Daily Inquirer
The Monetary Board of the Bangko Sentral ng Pilipinas on Thursday decided to keep policy rates unchanged after assessing that the inflation environment “remains manageable,” BSP Governor Amando M. Tetangco Jr. said.
This means that the BSP’s overnight borrowing rate remains at 4 percent and the overnight lending rate at 6 percent.
Both rates have been maintained at such levels since March, following two 25-basis-point reductions for both—once in January and again in March.
“[We believe] that the benign inflation outlook and robust domestic growth provide adequate room to keep policy rates unchanged,” Tetangco said.
“[Such is the case] especially as the cumulative 50-basis-point reduction in policy rates and the operational adjustments in the reserve requirements earlier in the year work their way through the economy,” he added.
Tetangco said latest inflation forecasts continue to lean on the lower half of the BSP’s target range of 3 percent to 5 percent for this year and next.
“At the same time, domestic macroeconomic readings have improved significantly in the first quarter,” he said, mainly referring to the 6.4-percent growth in gross domestic product during that period.
“Adequate liquidity and strong bank lending, spurred by prevailing low interest rates, should also help sustain domestic real sector activity in the months ahead,” he added.
Also, Tetangco said the Monetary Board noted that oil prices continue to show considerable volatility, while additional petitions for electricity rate adjustments could provide an upside influence on inflation.
He said that, likewise, the weak global economy can help keep prices of oil and other commodities moderate.
“As such, inflationary pressures and the risk of second-round effects may also ease in the coming months,” Tetangco said.
Further, the Monetary Board also decided to not change the reserve requirement ratios that banks should maintain.
“Going forward, the BSP will continue to monitor emerging price and output conditions to ensure that monetary policy remains in line with price stability while being supportive of economic growth,” Tetangco said.
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