BSP maintains key policy rates

MANILA — Philippine monetary officials on Thursday kept the Bangko Sentral ng Pilipinas’ (BSP) key policy rates, as they continue to see benign inflation environment and firm domestic output.

Rate of the overnight reverse repurchase (RRP) facility is still at 4 percent, the overnight repurchase (RP) rate at 4.5 percent, and the overnight deposit rate at 3.5 percent.

In a briefing, BSP Governor Benjamin Diokno said inflation is expected to remain within target, although the balance of risks is seen to be on the upside next year due to potential volatility in international oil prices on account of geopolitical tensions and the potential impact of the African swine fever on meat products.

“However, uncertainty over trade policies in major economies continue to weigh down on global economic activity and demand, and could thus mitigate upward pressures on commodity prices,” he said.

Despite the weak global growth output, Diokno said prospects for the Philippine economy continue to be robust on the back of firm domestic demand.

“Sustained policy support from increased fiscal spending, as well as improved domestic liquidity continues owing to recent monetary adjustments, is also expected to support growth in the coming months,” he said.

Diokno added the Board will continue to monitor developments that affect the inflation outlook and demand conditions “to ensure that the monetary policy stance remains consistent with its price and financial stability objectives.”

During the same briefing, BSP Monetary and Economic Sector officer-in-charge Illuminada Sicat said they will continue to be data-dependent on their next policy decisions, with the assessment covering both the local and external fronts.

She said the latest baseline forecast points to within-target inflation rate, with the average inflation projection for 2019 still at 2.4 percent and the 2020-2021 forecasts at 2.9 percent, at the lower half of the government’s 2 to 4-percent target for the three-year period.

“Inflation is expected to approach the target band after bottoming out in October and settle at the midpoint of the target by 2020 and 2021 as base effects dissipate,” she said.

After peaking at 6.7 percent in September and October 2018, rate of price increases posted its lowest rate this year last October at 0.8 percent and climbed to 1.3 percent last November due to the impact of higher sin taxes.

Aside from the impact of developments on inflation and domestic and global output, Sicat said they will also closely watch the result of cuts in banks’ reserve requirement ratio (RRR) on economic activities.

“At the moment, we need to assess (the) latest developments and consider whether that will have impact on inflation,” she added.