The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, on Thursday kept the prevailing benchmark interest rates unchanged despite the accelerating consumer prices.
Bangko Sentral managing director Francisco Dakila Jr., reading the official statement of Governor Nestor Espenilla Jr., said in a news briefing the Monetary Board maintained policy rates at 3.5 percent for overnight lending, 3 percent for overnight borrowing and 2.5 percent for overnight deposits. The reserve requirement ratio of 20 percent was also left untouched.
Dakila said the board’s decision was based on its assessment that while the latest baseline forecasts showed higher inflation this year, the inflation path could be expected to moderate and settle within the inflation target range of 2 percent to 4 percent in 2019.
Inflation rate climbed to a three-year high of 4 percent in January from 3.3 percent in December. The Monetary Board now expects an average inflation of 4.3 percent in 2018, up from 3.4 percent predicted in the previous meeting on Dec. 14, 2017. The inflation forecast for 2019 was also raised to 3.5 percent from 3.2 percent.
Dakila said the Monetary Board took into account the implementation of the Tax Reform for Acceleration and Inclusion law last month, the continued rise in global crude oil prices and the higher January inflation of 4 percent.
“The board also noted that prospects for domestic activity continue to be firm on the back of robust domestic demand, manageable growth in credit and liquidity, and a sustained recovery in global economic growth,” Dakila said.
He said the higher inflation in January was also due to better enforcement of tax laws on tobacco as well as temporary increases in prices of selected food items, such as fish and vegetables.
Dakila saidrisks to the inflation outlook remained tilted to the upside owing to price pressures emanating from possible further increases in global oil prices.
“The board stands ready to take appropriate measures as necessary to ensure that the monetary policy stance continues to support price and financial stability,” he said.
Espenilla said last week the first-round effects of the implementation of the Train law might be transitory but monetary authorities were carefully assessing the next-round effects of the tax reform program on consumer prices.
Inflation averaged at a manageable 3.2 percent at the end of 2017, within the government’s official target range of 2 percent to 4 percent.
The last time the Monetary Board tweaked the policy stance was in September 2014.