Inflation has slowed down to its slowest pace since the middle of 2013 due to cheaper fuel and lower utility rates. FILE PHOTO
MANILA, Philippines–Monetary authorities stand ready to contain volatility in financial markets, even as low inflation in January gave the central bank space to keep rates on hold to bolster economic growth.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. remained confident that consumer price movements would remain subdued in the coming years, but noted that adjustments in policy settings remained on the table.
This came as data this week showed that inflation had slowed down to its slowest pace since the middle of 2013 due to cheaper fuel and lower utility rates.
“We will continue to monitor developments, particularly in international oil prices and their impact on financial markets, and inflation expectations to see if there is a need to make adjustments in our policy levers,” Tetangco told reporters Thursday.
Inflation in January slowed to 2.4 percent from 2.7 percent the month before. The latest print was within the projected range of 1.8 to 2.7 percent, and was the slowest since August 2013.
Tetangco said this bolstered the view of “within target inflation over the policy horizon.”
Earlier this month, the BSP announced that it would keep its inflation target at a record low of 2 to 4 percent up to 2018—lower than 2014’s target range of 3 to 5 percent.
This reflects the economy’s improved productivity, which will help keep prices down, the BSP said.
“We expect the more neutral rhetoric of late to remain at next week’s policy decision,” Barclays bank economist Rahul Bajoria wrote in a note to clients, reacting to the central bank chief’s statements.
Barclays expects the BSP to hike interest rates by the fourth quarter of this year.
The BSP previously warned that, while cheap fuel tamed overall inflation, a reversal in international markets could drive consumer prices right back up—a scenario the BSP remains on guard against.
The benchmark overnight borrowing and lending rates currently stand at 4 and 6 percent, respectively. Both are half a percentage point up from record lows.