Monetary authorities during the last policy meeting for the year kept key rates steady while also maintaining the 2-4 percent inflation target for the next four years.
Despite external uncertainties, the Monetary Board during its meeting Thursday deemed “domestic demand conditions are likely to stay firm, supported by solid private household spending, higher government expenditure, and adequate domestic liquidity” in the near term, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. told reporters. The Monetary Board is the BSP’s highest policy setting body.
Tetangco said the Monetary Board has also considered the US Federal Reserve’s move last week to hike rates, including the possibility of three more upward movements next year.
“The Monetary Board also noted that maintaining monetary policy settings at this juncture will give the BSP more time to assess evolving economic developments and calibrate its policy tools as appropriate,” Tetangco said.
As such, the BSP maintained the overnight reverse repurchase facility at 3 percent. It also kept the interest rates on overnight lending and deposit facilities as well as the reserve requirement ratios unchanged.
Tetangco said inflation would likely average below the 2-4 percent target range this year. Headline inflation averaged 1.7 percent from January to November.
BSP Deputy Governor Diwa C. Guinigundo said the BSP continues to expect inflation settling at 1.8 percent by yearend.
But for 2017 and 2018, Guinigundo said the BSP’s inflation forecasts were raised to 3.3 percent and 3 percent, respectively, from 3 percent and 2.9 percent previously.
Guinigundo said rising oil prices, the impact of the sustained strong domestic economy, as well as the depreciation of the peso by about 5 percent year-to-date were expected to bring about faster inflation in the next two years.
As for 2019-2020, Guinigundo said they expect “inflationary trends to continue because the economy has become competitive” alongside expectations that oil prices would normalize as supply continues to outstrip demand. —BEN O. DE VERA