BANGKO Sentral ng Pilipinas Governor Amando Tetangco Jr. said the monetary policy stance remains appropriate at the moment, even if inflation accelerated to 1.1 percent in November from 0.4 percent in October.
The November figure brought the average inflation in the first 11 months to 1.4 percent, lower than the target range of 2 to 4 percent for 2015.
“As anticipated, inflation had bottomed out in October. With credit and domestic liquidity growth rates also stabilizing, these signal that our stance of policy right now is appropriate,” Tetangco said in a text message Friday.
“That said we will continue to monitor developments particularly actions of advanced economies. ECB [European Central Bank] cut rates a bit shallower than some anticipated. We will see how the balance of this, possible US lift-off this month and further moves from Chinese authorities would impact on domestic price and growth dynamics,” Tetangco said.
The Bangko Sentral earlier said inflation was seen settling below the target range of 2 percent to 4 percent this year due to slower increases in food prices.
Latest baseline inflation forecasts showed that inflation is likely to settle slightly below the target range of 2 percent to 4 percent for 2015 before rising gradually toward the midpoint of the target range of 2 to 4 percent in 2016-2017.
“Risks to the inflation outlook continue to be broadly balanced. Pending petitions for power rate adjustments and the impact of stronger-than-expected El Niño weather conditions on food prices and utility rates are seen to pose upside risks to the outlook,” it said.
Downside risks, meanwhile, could stem from slower-than-expected global economic activity and petitions for lower transport fares.
It said while inflation expectations have breached the lower end of the 2015 target band, they remained within the inflation target range over the policy horizon.
The Monetary Board, the policy-making body of Bangko Sentral, on Nov. 12 kept the benchmark interest rates steady at 4 percent for overnight borrowing and 6 percent for overnight lending—the ninth time since October last year—due to a manageable inflation environment.
The interest rates on term RRPs, RPs, special deposit accounts and reserve requirement ratios were also left unchanged.
The board reduced the inflation average forecast for 2015 to 1.4 percent from 1.6 percent; 2016 to 2.3 percent from 2.6 percent; and 2017 to 2.9 percent from 3 percent.
