The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, on Thursday kept the benchmark interest rates steady amid low inflation and robust economic growth.
The board maintained the rates on overnight borrowing at 4 percent and overnight lending at 6 percent for the 13th consecutive meeting. The last time the board tweaked the policy stance was in September 2014.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said latest forecasts continued to indicate that average inflation would likely settle within the target range of 2 percent to 4 percent for 2016 to 2017.
“The Monetary Board observed that inflation continues to be driven mainly by supply-side factors. Meanwhile, inflation expectations for 2016 have declined slightly due to low inflation readings in recent months but remain firmly within the inflation target band over the policy horizon,” Tetangco said.
He said the board also recognized that while global economic conditions turned weaker since the previous meeting, prospects for domestic economic activity remained robust, backed by solid private household consumption and investment, buoyant business sentiment and adequate credit and domestic liquidity.
“At the same time, the overall balance of risks surrounding the inflation outlook remains tilted to the downside, with potential downward price pressures associated with slower-than-expected global economic activity and possible second-round effects from lower international oil prices,” he said.
He said upside risks to the inflation outlook could come from the impact of El Niño dry weather conditions on food prices and utility rates as well as pending petitions for power rate adjustments.
Given the manageable inflation environment, the Monetary Board kept the average inflation forecast at 2.1 percent for this year and 3.1 percent for 2017. Inflation in the first four months averaged 1.1 percent, below the government’s official target range.
Bangko Sentral Deputy Governor Diwa Guinigundo said the decision to keep the policy rates steady was not affected by the scheduled implementation of interest rate corridor in the second quarter.
“The implementation of IRC is an independent decision and different from the policy decision,” Guinigundo said.
The details of the interest rate corridor will be announced on Monday. “The governor will provide the actual date of implementation of the IRC,” Guinigundo said.
