BSP keeps policy rates, inflation outlook steady

Outgoing Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. announced that the Monetary Board has maintained its key policy rates, while inflation forecasts remained unchanged.
(Photo: Ramon FVelasquez/Wikipedia)

MANILA, May 11 — Outgoing Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. announced that the Monetary Board has maintained its key policy rates, while inflation forecasts remained unchanged.

In a press briefing following a policy meeting Thursday, Tetangco said interest rate of the central bank’s overnight reverse repurchase (RRP) facility was still at 3.0 percent.

The Monetary Board also kept interest rates of overnight lending and deposit facilities steady, while reserve requirement ratios were left unchanged.

Tetangco said the Monetary Board had kept policy rates steady as inflation remained manageable.

BSP Monetary Policy Sub-Sector Managing Director Francisco Dakila Jr., in the same briefing, said inflation projection was still at 3.4 percent for this year and at 3.0 percent for 2018.

“We took into account the uptick in inflation in March and April, and this contributed to upward adjustment in the inflation forecast. However during the same period of time, there was a reduction in oil prices because of the lower outlook for Dubai crude,” Dakila said.

Price outlook for Dubai crude this year is at USD51.

32 per barrel, lower than the USD51.94 per barrel price projection in the Monetary Board’s March meeting.

Also, lower price outlook is expected for 2018 at USD51.03 per barrel from the previous meeting’s forecast of USD51.55 per barrel.

“But the offshoot is that those are the two main factors that influenced the inflation forecast. What happened was the two factors just balance each other out, so the inflation outlook was maintained, and consequently, that was the major basis for the Monetary Board’s decision to hold its policy settings steady,” Dakila explained.

BSP noted that main driver for inflation is the Comprehensive Tax Reform Program of the government, but the central bank assessed that the impact of the tax reform will not threaten the inflation target.

“Over long term, the tax reform program will be beneficial to the economy,” Dakila said.

The central bank said other downside risk to inflation was coming from external factors such as protectionist tendency and policy uncertainties of other countries.

“Going forward, the BSP will remain vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure that future inflation remains consistent with the medium-target while being supportive of sustainable economic growth,” Tetangco said.