Regulator adopts dovish tone on inflation

The central bank on Tuesday adopted a dovish tone on inflation as it expected the movement of consumer prices to remain manageable.

The higher cost of rice and adjustments in power rates could have accelerated the rise in consumer prices last March, the Bangko Sentral ng Pilipinas (BSP) said. But the lower cost of other food products could have tempered the rate of rise in prices.

“Over the policy horizon, inflation is expected to be manageable. Average inflation is seen to stay slightly above the mid-point of the target ranges,” BSP Governor Amando M. Tetangco Jr. said in a statement, holding off on any hints on the Monetary Board’s policy action next week.

During its last meeting, the BSP ordered an increase in the amount of money to be kept idle in bank vaults in the form of deposit reserves. The move was meant to mop up from the economy excess liquidity, which grew by a record pace of 37 percent last February.

Although the central bank prefers to see the full effects of any policy action before making another move, it is ready to adjust the policy settings, if needed, BSP Assistant Governor Cyd Tuano-Amador said on Monday.

Security Bank executive vice-president for financial markets Rafael Algarra said market players should still take their cues from the BSP’s previous hawkish comments that preceded the increase in reserve requirements.

“I think they didn’t feel a need to reiterate their previous signal,” Algarra said, adding that the bank, one of the top 10 dealers of Philippine government securities, expects another 1 percentage-point hike in reserve requirements at next week’s policy meeting.

He said the adjustment in reserve requirements last month showed that liquidity weighed the most on policymakers’ minds.  Paolo G. Montecillo