June 23, 2018, 10:31 am
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MB keeps rates steady

As the outlook for the inflation environment remains manageable, the policymaking Monetary Board yesterday kept steady the key rates of the Bangko Sentral ng Pilipinas.

The interest rate on the BSP’s overnight reverse repurchase (RRP) facility remains at 3 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. 

The reserve requirement ratios were likewise left unchanged. 

Nestor Espenilla, BSP Governor, said the Monetary Board’s decision was based on its assessment  the outlook for the inflation environment remains manageable. 

This despite inflation has trended higher due mainly to higher utility rates and fuel prices.

Inflation reached a three-year high of 3.5 percent in October, pushed by faster growth of prices for alcoholic beverages and tobacco and housing and utilities.  Inflation in September was at 3.4 percent and 3.1 percent in August.

Espenilla said latest forecasts continue to show the future inflation path staying within the government’s target range of between 2 and 4 percent for this year up to 2019.

“Inflation expectations also remain anchored close to the midpoint of the inflation target range over the policy horizon,” Espenilla said.

He said the balance of risks to the inflation outlook continues to lean toward the upside due to possible higher crude oil prices. 

The proposed tax reform program may also exert potential transitory pressures on prices, Espenilla said.

“Although various social safety nets and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term,” Espenilla said.

He said the proposed reform in the rice industry involving the replacement of quantitative restrictions with tariffs and the deregulation of rice imports could temper inflation. 

He added geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies pose downside risks to near-term prospects for global economic growth. 

“The outlook for domestic economic activity remains firm, supported by positive consumer and business sentiment and ample liquidity,” Espenilla said.

He stressed that while credit continues to expand in line with output growth, “the Monetary Board remains watchful over evolving liquidity and credit conditions and their implications for price and financial stability.” 

“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,” Espenilla said.
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