Philippines holds rate, inflation still seen in target range

    The central bank of the Philippines left its key rates steady, including the overnight borrowing rate at 4.0 percent, noting that the risks surrounding the outlook for inflation had shifted slightly to the downside but it still expects inflation to settle within its target range in 2016-2017.
    Bangko Sentral ng Pilipinas (BSP), which left rates steady in 2015, added that downward pressures on inflation could come from slower-than-expected global growth and low oil prices while upside risks could come from the El Nino dry weather and pending requests for power rate changes.
    Inflation eased to 1.3 percent in January from 1.5 percent in December, below the BSP's target of 3.0 percent, plus/minus 1 percentage points. The central bank added that inflation expectations remain "firmly anchored" within its target band.


    Bangkok Sentral ng Pilipinas issued the following statement:

"At its meeting today, the Monetary Board decided to maintain the BSP's key policy rates at 4.0 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6.0 percent for the overnight lending or repurchase (RP) facility.  The interest rates on term RRPs, RPs and special deposit accounts (SDA) were also kept steady. The reserve requirement ratios were likewise left unchanged.

The Monetary Board’s assessment of manageable inflation dynamics and robust growth conditions continue to support steady monetary policy settings.  Average inflation is projected to settle within the target range of 3.0 percent ± 1 percentage point for 2016-2017, while inflation expectations remain firmly anchored within the inflation target band over the policy horizon.

The Monetary Board also noted that the risks surrounding the inflation outlook have shifted slightly to the downside. Downward pressures on inflation could arise from slower-than-expected global economic activity and potential second-round effects from lower international oil prices, while upside risks could come from the impact of prolonged El Niño dry weather conditions on food prices and utility rates as well as pending petitions for power rate adjustments.

At the same time, the Monetary Board observed that domestic demand conditions are likely to stay firm, supported by solid private household and capital spending, buoyant market sentiment, and adequate domestic liquidity. The Monetary Board also considered that the lingering uncertainty over economic growth prospects across the globe could continue to drive volatility in global financial markets.

Going forward, the Monetary Board affirmed the continuing need for vigilance over domestic and external developments to ensure that the monetary policy stance remains in line with price and financial stability."

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