BSP keeps policy rates steady

The Bangko Sentral ng Pilipinas (BSP) kept its policy stance steady during a meeting on Thursday, keeping faith in its assessment that the inflation environment remains manageable.

The BSP's policy-setting Monetary Board retained the interest rate on overnight borrowing at 3 percent.

"The corresponding interest rates on the overnight lending and deposit facilities were also kept steady," BSP Governor Nestor Espenilla Jr. said in a briefing.

"The reserve requirement ratios were likewise left unchanged," Espenilla added.

"The Monetary Board's decision is based on the assessment that the inflation environment remains manageable," the central bank chief noted.

The prevailing policy rates have been in place since June 2016 when the BSP adopted an interest rate corridor system.

Inflation forecast

In the same briefing, BSP Deputy Governor Diwa Guinigundo said the board adopted a revised inflation outlook particularly for 2019.

“The meeting today considered the forecast of the following: for 2017 it is still 3.2 percent, 2018 still 3.2, but for 2019 there’s a slight adjustment to 3.2 from 3.1 percent,” Guinigundo said.

The following factors were considered by monetary authorities in adjusting the 2019 inflation outlook:

• Depreciation of the peso

• Higher oil prices in global markets

• High liquidity driven by demand for credit and robust economic activity

• P21 daily minimum wage hike approved for Metro Manila

Nevertheless, Espenilla said the latest inflation forecast show the future inflation path will continue to stay within the 2017-2019 target range.

“Inflation expectations remain firmly anchored close to the midpoint of the government’s 3 percent ± 1 percentage point target over the policy horizon,” the BSP chief said.

“The balance of risks to the inflation outlook also continues to be on the upside. While the proposed tax reform program may exert potential transitory pressures on prices, various social safety nets and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium-term,” Espenilla noted.

“The BSP will continue to be vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure stable prices while supporting sustainable economic growth,” he added. — VDS, GMA News