The Monetary Board (MB) maintained its policy stance in a meeting yesterday amid expectations that the rise in commodity prices would be tempered in the next three years.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr., who is also Monetary Board chair, said in a briefing that the rate on the overnight reverse repurchase facility was kept at 3 percent.
Tetangco added that the corresponding rates on the overnight lending and deposit facilities were also maintained at 3.5 percent and 2.5 percent, respectively.
He said the decision was based on the MB’s assessment that the “inflation environment continued to be manageable.”
“Latest baseline forecasts indicate a lower path of future inflation, with average inflation remaining with the target of 3 percent plus or minus one percentage point for 2017-2019,” Tetangco said.
“At the same time, the assessment risks to the inflation outlook remains tilted toward the upside,” he added. “While there may be potential transitory impact of the proposed tax reform program, the social safety nets are expected to mitigate the resulting inflationary pressures.”
Tetangco also said keeping key policy rates in the Philippines unchanged would allow the BSP to continue to assess evolving economic developments and “calibrate its policy tools as appropriate” amid the United States Federal Reserve’s decision to further raise its key rates.
Yesterday, Credit Suisse also said in a research note it expected the BSP to keep rates on hold for the rest of the year, changing a previous forecast for a 25-basis-point hike in the second semester.
The Swiss bank said it changed its outlook in anticipation of a further slowing of the Philippine economy.
“Money market rates have risen year-to-date, but are unlikely to rise further in our view,” the bank said.
Credit Suisse cut its gross domestic product (GDP) growth forecast in 2017 to 6 percent from 6.4 percent.
“Driving our forecast is our expectation that private consumption will moderate further in large part due to an unusually weak labor market,” the bank said.