The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, on Thursday kept the benchmark interest rates steady, amid manageable inflation and robust domestic economic growth.
Bangko Sentral Governor Amando Tetangco Jr. said in a news briefing the board retained the policy interest rates at 3 percent for overnight borrowing, 3.5 percent for lending and 2.5 percent for special deposit account. The reserve requirement ratio was also left unchanged.
“The Monetary Board’s decision is based on its assessment that the outlook for inflation remains manageable, consistent with favorable growth prospects,” Tetangco said.
“While the average headline inflation for the first two months has risen due to the recent increases in food and oil prices as well as base effects, latest baseline forecasts are slightly lower than previous forecasts and within the target range of 2 to 4 percent for 2017 and 2018,” Tetangco said.
Inflation in the first two months this year averaged 3 percent, or at the mid-point of the target range of 2 percent to 4 percent.
Tetangco said the balance of risks surrounding the inflation outlook remained tilted to the upside, given the transitory impact of the proposed tax reform program of the government and possible adjustments in transportation fares and electricity.
Bangko Sentral Deputy Governor Diwa Guinigundo said there was no immediate need for additional monetary stimulus at the moment, given the “expected strong domestic demand” in the economy.
The board slightly reduced the inflation forecast this year to 3.4 percent from 3.5 percent made in the previous meeting. The forecast for 2018 was also reduced to 3 percent from 3.1 percent.
Tetangco said with these considerations, the prevailing monetary policy settings remained appropriate.
Guinigundo said local monetary authorities would always be “data-dependent” on deciding whether to change or keep its policy stance.
ING Bank Manila said in a report Thursday that as Tetangco was going to step down as BSP governor in July, “we think he will do so without raising rates.”
“We are in line with consensus in forecasting one 25bp BSP policy rate hike in each of the third and fourth quarters,” ING Bank said.
Tetangco will end his second term in July this year. He was first appointed in 2005 and reappointed in 2011.
DBS Bank of Singapore also said in a report that Bangko Sentral might tweak its policy stance by the middle of this year by increasing interest rates by a total of 50 basis points in May and June.
“Looking at how the growth-inflation dynamics are shaping up, however, chances are we are still going to see a 25bps rate hike each in May and June. GDP growth momentum is robust. Loan growth has inched up to 17 percent by end-2016, up 5-percentage points from the previous year,” the bank said.