Bangko Sentral ng Pilipinas. INQUIRER.net FILE PHOTO
Interest rates may be kept at their current levels for now as signs point to more stable consumer prices over this month, giving space for monetary authorities to pause and plot out a new plan of action.
The Bangko Sentral ng Pilipinas (BSP) said that while a decision on interest rates would still depend on available data at the time of the next policy meeting, at the moment, there were few reasons to make adjustments.
“As I’ve been saying, if, among others, inflation continues on this decelerating trend and if there continue to be no signs of second-round effects, then there is room for BSP to pause and keep its current stance,” Governor Amando M. Tetangco Jr. said.
Consumer price increases likely averaged between 3.5 and 4.3 percent in November, slowing from October’s 4.3 percent. If the projection proves accurate, inflation will have slowed down for the third consecutive month after peaking at 4.9 percent in August.
Rising inflation in previous months prompted the BSP to raise its benchmark interest rates from record lows to increase the cost of money and stem demand for new loans. Likewise, rates for special deposit accounts (SDA) were adjusted upward while reserve requirements were increased to siphon cash from the economy.
The central bank’s primary mandate is to keep prices stable to protect the peso’s purchasing power. Reining in excess lending puts a drag on consumer demand, which can pull prices down. The BSP’s last policy meeting for the year is scheduled on Dec. 11 or a week after inflation data for November is scheduled for release.
Earlier this year, inflation rose as a result of the country’s thin food supply due to damage to farmlands late last year caused by Supertyphoon “Yolanda.” Input costs for manufacturers also rose due to the congestion at Manila’s ports, where most of the country’s domestic and international freight passes through.
In his statement, Tetangco said stable food and fuel costs, as well as lower electricity bills for consumers in November, probably kept inflation low.
At its last policy meeting, the BSP said it saw inflation for the year averaging 4.4 percent, which, although faster than last year’s 3 percent, was still within the target range of 3 to 5 percent.