BANGKO Sentral ng Pilipinas Governor Nestor Espenilla Jr. said local monetary authorities will not necessarily move in sync with the US Federal Reserve if the US regulator decides to raise interest rates in the coming weeks.
Fed officials in an earlier meeting this month favored increasing interest rates, according to the minutes of the Oct. 31 to Nov. 1 gathering released in Washington Wednesday.
Reports said policy makers opted to keep rates unchanged during the meeting but are expected to hike them in December in line with a gradual tightening policy.
“Our monetary policy is independent of what Fed does. We’re not obliged to follow since we don’t have fixed exchange rate. Instead, our primary focus is on the inflation outlook relative to our target,” Espenilla said in a statement.
Local monetary authorities during the last Monetary Board meeting on Nov. 9 kept the benchmark interest rates steady on account mainly of because of a manageable inflation environment.
The interest rates of 3.5 percent for overnight lending, 3 percent for overnight borrowing, and 2.5 percent for overnight deposit facility were left unchanged. The reserve requirement ratios were also maintained.
The Monetary Board’s decision was based on its assessment that the outlook for the inflation environment remained manageable. While inflation trended higher [in October at 3.5 percent] due mainly to higher utility rates and fuel prices, latest forecasts showed the future inflation path staying within the government’s 2 percent to 4 percent target range for 2018 to 2019.
Espenilla said inflation expectations also remained anchored close to the midpoint of the inflation target range over the policy horizon. He said the balance or risks to the inflation outlook continued to lean toward the upside due to possible higher crude oil prices.
The board also kept the average inflation forecast at 3.2 percent both for 2017 and 2019. But the forecast for 2018 was raised to 3.4 percent from 3.2 percent made on the Sept. 21 meeting.
Deputy Governor Diwa Guinigundo said the board in raising the forecast for 2018 took into account the possible higher crude oil prices next year as member states of the Organization of Petroleum Exporting Countries were planning to cut oil production, a move backed by non-Opec producers.
Guinigundo said the decline in commercial oil stock was going to affect the supply of petroleum products in the world market.
Inflation in October accelerated to 3.5 percent from 3.4 percent a month ago, the fastest in almost three years, driven mainly by higher annual increases in the prices of alcoholic beverages and tobacco, utilities and fuel products.
This brought the average inflation in the first 10 months to 3.1 percent, slightly higher than the midpoint of the government’s official target range of 2 percent to 4 percent this year.
The October inflation was the fastest since the 3.7 percent recorded in November 2014, confirming the earlier projection of the Finance Department that consumer prices likely peaked for the month. It was also significantly faster than 2.3 percent a year ago.
The Monetary Board meets again on Dec. 14, the last policy meeting for 2017.