Interest rates will likely be kept at record lows at the Bangko Sentral ng Pilipinas (BSP) policy meeting early February as officials remain unconcerned over the movement of consumer prices, despite spikes caused by Super Typhoon “Yolanda.”
BSP officials Friday admitted that risks to inflation were currently tilted on the “upside,” indicating a possible acceleration in the rise of consumer prices in the coming months.
However, the monetary authority said these pressures were merely temporary effects of “Yolanda” and other natural calamities last year that destroyed vast farmlands, resulting in the tightness in supply of food and other commodities.
“The inflation outlook is tilted on the upside due to supply-related concerns, which are likely transitory,” said Zeno Abenoja, director of the central bank’s economic research department. “The BSP is of the view that robust growth and the inflation outlook continue to support the maintenance of current monetary policy settings.”
Consumer prices rose at their fastest pace in two years last December, with inflation hitting 4.1 percent, due mainly to the effects of “Yolanda” on the nation’s food supply. The damage caused by the storm also led to higher demand for construction materials in Visayas, leading to higher prices.
The central bank had said that the full effects of “Yolanda” would be more evident in 2014, with inflation expected to average 4.5 percent, accelerating from 3 percent last year. The projection, however, is still within the BSP’s target range of 3 to 5 percent for the year.
Inflation is the main data point tracked by the BSP in crafting its monetary policy settings. The central bank’s goal is to keep interest rates as low as possible to help spur economic growth without fueling excessive demand that could lead to higher consumer prices.
The BSP’s benchmark overnight borrowing and lending rates stand at record lows of 3.5 and 5.5 percent. Yields for special deposit accounts are also at a record low 2 percent across all maturities.
The BSP’s policy-setting Monetary Board next meets to decide on possible adjustments of benchmark on Feb. 6.