The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, on Thursday kept the benchmark interest steady, amid manageable inflation and sustained economic growth.
Bangko Sentral Governor Amando Tetangco Jr. said in a news briefing the board maintained the policy rates at 3.5 percent for overnight lending, 3 percent for overnight borrowing and 2.5 percent for overnight deposit facility.
“The board’s decision was based on its assessment that the inflation environment remains manageable. Latest forecasts continue to indicate that average inflation is likely to settle slightly below the 2 percent to 4 percent target range in 2016 and rise toward the mid-point of the target range in 2017 and 2018,” Tetangco said.
The bank last reduced the rate in May and narrowed the band around it to make monetary policy more effective.
Tetangco, however, said upside risks to inflation could emanate from pending petitions for adjustments in electricity rates. He also said that slower global economic activity remained a key downside risk to inflation outlook.
Tetangco said economic conditions continued to be firm, backed by solid private household consumption and investment, buoyant business and consumer sentiment and adequate credit and domestic liquidity.
He said given these considerations, the board believed that current policy settings remained appropriate. The manageable inflation environment prompted the board to reduce the inflation forecast this year to 1.8 percent from the previous estimate of 2 percent. Inflation forecast for 2017 was also cut to 2.9 percent from 3.1 percent. Meanwhile, inflation forecast for 2018 was kept at 2.6 percent.
Tetangco said inflation was expected to remain manageable in the coming months despite risks to the outlook this year. The Philippine Statistics Authority said inflation rate stood at 1.9 percent in July.
This brought the average inflation in the first seven months to 1.4 percent, below the Bangko Sentral’s target range of 2 percent to 4 percent for 2016.
He said monetary authorities would continue to be mindful of external developments, particularly geopolitical risks that could trigger volatility in commodity prices and portfolio rebalancing.