The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, kept the benchmark interest rates at record low levels Thursday, despite an earlier decision by the US Federal Reserve to increase interest rate by a quarter point.
Bangko Sentral Deputy Governor Diwa Guinigundo said in a news briefing the board kept the interest rates at 3.5 percent for overnight lending, 3 percent for overnight borrowing and 2.5 percent for overnight deposit. The reserve requirement ratio was also left untouched.
“The board’s decision was based on its assessment that the outlook for the inflation environment has been broadly unchanged,” Guinigundo said, adding that the baseline forecasts remained within the target range of 2 percent to 4 percent for 2018 to 2019.
Guinigundo said the overall balance of risks to the inflation outlook remained tilted to the upside because of possible higher crude oil prices.
The board also maintained the inflation average forecasts of 3.2 percent for 2017, 3.4 percent for 2018, and 3.2 percent for 2019, the same numbers predicted during last previous meeting.
Guinigundo said while there might be potential transitory effects on consumer prices from the proposed tax reform program, various mitigation measures and the resulting improvement in output and productivity were expected to temper the impact on inflation over the medium term.
The first package of the five-package Comprehensive Tax Reform Program―the Tax Reform for Acceleration and Inclusion Act―is expected to be signed into law before the end of the year by President Rodrigo Duterte for targeted implementation in January 2018.
“The Monetary Board also observed that geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continue to pose downside risks to the near term prospects for global economic growth,” Guinigundo said.
Inflation in the first 11 months averaged 3.2 percent, still near the midpoint of the target range of 2 percent to 4 percent. Inflation eased to 3.3 percent in September from a peak of 3.5 percent in October.
The economy grew 6.7 percent in the first three quarters, driven by robust domestic demand and higher fiscal spending. This was within the target range of 6.5 percent to 7.5 percent for the year.