Monetary authorities kept interest rates on hold this week as officials resisted the urge to take a more accommodative stance as their counterparts elsewhere in the region have done.
A senior central bank official said the Philippine economy already has the stimulus it needs to stay on its current growth path.
Following its Thursday policy meeting, the policymaking Monetary Board said benchmark overnight borrowing and lending rates were kept steady at 4 and 6 percent, respectively. Analysts polled by the Inquirer this month anticipated the BSP’s recent move.
“The economy doesn’t need additional monetary stimulus,” BSP Deputy Governor Diwa C. Guinigundo said at a press conference.
He said the economy was on track to hit the government’s expansion goal of between 7 and 8 percent from last year’s 6.1 percent and 2013’s 7.2 percent. This year’s inflation forecast was also revised downwards to 2.2 percent from 2.3 percent.
The BSP’s move comes amid rate cuts implemented by other central banks in the region, among them South Korea, Thailand and Japan.
For the Philippines, Guinigundo said few factors have changed since the Monetary Board’s last meeting six weeks ago. The US Federal Reserve is still expected to hike rates this year, consumer prices remain stable, and the country’s growth prospects are still bright.
Earlier this month, the US Fed hinted that it could start to raise the cost of money as early as June. Higher rates in the US may trigger a fresh wave of capital flight from emerging markets like the Philippines, threatening the country’s financial stability.
Guinigundo said that, in keeping rates on hold following adjustments made last year, the BSP was preparing for more volatile financial market conditions.
“We don’t want to waste the preemptive moves we made,” he said.
Last year, the BSP hiked the reserve requirement for banks and yields on special deposit accounts to mop up excess liquidity from the economy. Benchmark rates were also raised from record lows.
Despite last year’s tightening streak, Guinigundo said the cost of money in the Philippines was still among the lowest in the world.
“In terms of providing monetary stimulus, the economy hardly needs it,” he explained.