MANILA, Philippines–Benchmark policy rates will be kept on hold this week as the central bank—unconcerned for now over the threat of rapid price increases—looks to give the economy enough space to grow.
A poll by the Inquirer last week showed 10 banks were unanimous in saying the Bangko Sentral ng Pilipinas’ (BSP) last rate-setting meeting for the year would be uneventful.
“Inflation was lower than we expected. Given that, nothing will happen,” Security Bank economist Patrick Ella said in an interview last Friday.
Other banks that see policy rates being kept steady are Bank of the Philippine Islands, Barclays, BDO Unibank, DBS, First Metro Investments, HSBC, ING, and Metropolitan Bank and Trust. Brokerage firm Maybank ATR KimEng also sees rates staying where they are now.
On Friday, the Philippine Statistics Authority (PSA) said consumer prices rose an average 3.7 percent in November, slowing sharply from October’s 4.3 percent. It was also slower than the median forecast of 4 percent by analysts polled by the Inquirer.
Members of the policy-making Monetary Board of the BSP will have their last rate-setting meeting on Thursday, Dec. 11. In its October meeting, the BSP paused from a tightening cycle that saw its benchmark rates raised from record lows by half a percentage point.
The BSP’s overnight borrowing and lending rates now stand at 4 and 6 percent, respectively.
Apart from rate increases, banks were also told early this year to raise the amount of clients’ deposits set aside as reserves, while yields on special deposit accounts (SDA) were raised to encourage banks to keep more cash idle in BSP vaults.
This pause came as inflation fell off its peak of 4.9 percent in July and August, following moves by the central bank to stem liquidity growth. Port congestion in Manila, one of the main reasons for supply pressures that drove prices up, is also in the process of being sorted out following the lifting of the city’s ban on trucks.
Further pushing the rate of average price increases is the steady decline in oil prices—now down by nearly a fifth since the start of the year.
“We wouldn’t be surprised if the BSP may tweak with the SDA rates again in 2015, but for now, we don’t expect any change,” DBS economist Gundy Cahyadi said.