Monetary authorities kept key interest rates at record lows for the ninth consecutive time on Thursday to give the economy more breathing room to expand amid an uncertain global environment.
However, the central bank noted that the balance of risks to consumer prices were “weighted on the upside,” which may lead to a hike in interest rates in the coming year to ease price pressures.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the Monetary Board could afford to keep its overnight borrowing and lending rates steady for now due to benign inflation pressures this year and the next.
“The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable,” Tetangco said at a press briefing.
The BSP’s benchmark overnight borrowing and lending rates have been at record lows of 3.5 and 5.5 percent since October last year.
The yield for special deposit accounts (SDA), another tool the BSP uses to control the amount of money circulating in the economy, also stands at a record low of 2 percent across all maturities.
“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,” he said.
Consumer prices have risen at a rate of 2.9 percent since the start of the year to October.
Tetangco noted that the policymaking Monetary Board was mindful that inflationary pressures were rising, given potential increases in food prices, as well as the pending petitions for utility rate adjustments.
In a statement, the BSP said it would continue to monitor the emerging price and output conditions here and abroad to ensure the consistency of the monetary policy stance with stable prices and sustainable economic growth.
BSP Deputy Governor Diwa C. Guinigundo said inflation for 2013 would likely average at 2.9 percent, before accelerating to 4.5 percent in 2014, higher than the previous forecast of 4 percent. The 2014 forecast is still within the central bank’s target range of 3 to 5 percent for both years.