THE Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, on Thursday kept the benchmark interest rates steady on subdued inflation and robust domestic economy.
Bangko Sentral Governor Amando Tetangco Jr. said the interest rates of 3.5 percent for overnight lending, 3 percent for overnight borrowing, and 2.5 percent for overnight deposits were maintained. Also, the reserve requirement ratios were left unchanged.
“The board’s decision is based on its assessment that inflation continues to be manageable, with a gradual return to the inflation target range expected over the policy horizon,” Tetangco said.
“While forecasts indicate that average inflation is likely to settle below the lower edge of the 2 to 4 percent target range in 2016, it is projected to rise toward the midpoint of the target range in 2017 and 2018,” Tetangco said.
Tetangco said the prospects for global economic growth remained modest and uneven since the previous meeting.
He said domestic economy, on the other hand, was seen to be firm, backed by solid private household consumption and investment, buoyant business and consumer sentiment, and adequate credit and domestic liquidity.
The board raised the inflation average target this year to 1.8 percent from 1.7 percent. The targets for 2017 and 2018 were increased to 3 percent from 2.9 percent, and 2.9 percent from 2.6 percent, respectively.
Deputy Governor Diwa Guinigundo said the upward adjustments stemmed from the higher inflation in September and October at 2.3 percent, weaker peso and increase in petroleum prices.
The peso on Thursday closed seven centavos weaker at 48.66 from 48.59 Wednesday, but Guinigundo did not attribute the currency’s further decline against the dollar to the victory of Donald Trump in the US presidential election.
“It is difficult to make attribution to that alone. There are factors behind the exchange rates, such as fundamentals and sentiment,” Guinigundo said.
He said the board was monitoring the volatility because of its impact to investors’ sentiment.
Guinigundo also said Bangko Sentral would not be compelled to tighten its own monetary policy stance even if the Fed decided to delay interest rates hike this year as a result of the US election, saying inflation would remain subdued over the policy horizon.
The economy grew 6.9 percent in the first half, near the upper bound of the Duterte administration’s target range of 6 percent to 7 percent this year.
The board’s move Thursday was the fourth time that it maintained the adjusted interest rates which was implemented on June 3 in preparation for the interest rate corridor.