MB monitoring US Fed, global developments

Global developments will be some of the major focus of the policy-setting Monetary Board of Bangko Sentral ng Pilipinas when it meets next week, especially the impact to inflation and economic growth, Governor Nestor Espenilla Jr. said Wednesday.

“The Monetary Board will be evaluating a very rich and broad range of information at its policy meeting next week. Recent developments on inflation and economic activity are key inputs but these are certainly not the only consideration,” Espenilla told reporters in a statement.

Expected to be discussed during the Monetary Board meeting would be the result of the Federal Reserve meeting scheduled Wednesday, as well as the trade tussle between the United States and China.

“We will be examining closely all the potential drivers of future inflation through the various transmission channels as affected by global developments, expectations formation, and uncertainty. It is a fairly complex environment that we need to navigate,” Espenilla said.

On May 10, the  Monetary Board increased the policy interest rates by 25 basis points to 3.25 percent in a move to arrest any potential second-round effects of rising inflation rate.

The interest rates on overnight lending and deposit facilities were also increased accordingly, or to 3.75 percent from 3.5 percent, and 2.75 percent from 2.5 percent, respectively.

Espenilla said in deciding to raise the policy interest rate, the board noted the latest forecasts had further shifted higher, an indication that inflation pressures could become more broad-based over the policy horizon.

The Monetary Board raised the inflation forecast for 2018 to 4.6 percent from the 3.9-percent estimate made in the March 22 meeting. It also increased the forecast for 2019 to 3.4 percent from 3 percent.

DBS Bank of Singapore said in a report this week it was expecting the Monetary Board to increase interest rates one more time later this year, possibly taking into account the accelerating inflation, which hit a new five-year high of 4.6 percent in May and averaged 4.1 percent in the first five months, above its official target range of 2 percent to 4 percent. 

Topics: Monetary Board , Bangko Sentral ng Pilipinas , Governor Nestor Espenilla Jr. , Federal Reserve
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