BSP keeps key rates anew

FILE PHOTO/ The BSP complex in Manila (Photo by Ramon FVelasquez – Own work, CC BY-SA 3.0)

MANILA – The Bangko Sentral ng Pilipinas (BSP) kept its key policy rate at 3 percent again on Thursday, and monetary officials attributed this to a manageable inflation outlook.

Aside from keeping the reverse repurchase rate (RRP) at 3 percent, the central bank’s policy-making Monetary Board (MB) also kept steady the repurchase (RP) rate at 3.5 percent, the special deposit account (SDA) rate at 2.5 percent, and banks’ reserve requirement ratios.

In a briefing, BSP Governor Nestor A. Espenilla Jr. said inflation is projected to remain within the government’s 2 to 4 percent target band for 2017 to 2019, even as it continues to trek upwards.

In October, inflation rose to 3.5 percent from the preceding month’s 3.4 percent, bringing the year-to-date average to 3.2 percent.
Espenilla said risks on inflation lean on the upside because of a possible sustained rise of crude oil prices, as well as the transitory impact on domestic prices of the expected implementation of the first tax reform package starting January 1, 2018.

The BSP head, however, said such possible impacts of the tax reform on domestic prices are expected to be offset by the “various social safety nets and the resulting improvement in output and productivity.”

He said the proposed reform in the rice industry, particularly the implementation of a tariff in lieu of the quantitative restrictions and the rice imports deregulation, is also expected to counter any inflation uptick.

Geopolitical tensions overseas and “lingering uncertainty over macroeconomic policies in advanced economies” are additional offsetting factors on inflation, he said.

The strong rise of domestic credit, in turn, is being monitored by the BSP, he said, citing that this is in line with the expansion of the domestic economy.

“Based on these considerations, the Monetary Board believes that prevailing monetary policy settings continue to be appropriate. The BSP will continue to monitor price and output developments for any risks to the inflation outlook and will adjust its policy settings as necessary to ensure stable prices and sustainable economic growth,” he added. (PNA)