BSP still watchful of inflation pressures

MANILA, Philippines - The Bangko Sentral ng PIlipinas (BSP) remains watchful of pressures on inflation even after the rate eased in June, BSP Governor Amando M. Tetangco Jr. told reporters.

“We saw some deceleration in the inflation rate for June to 4.4 percent compared to 4.5 percent for May… so we’re looking at that,” Tetangco said.

“We will continue to assess whether this is something that would continue or there would be some ups and downs in inflation rate for the rest of the year,” he added.

Inflation has averaged 4.2 percent in the first half of the year, above the midpoint of the BSP’s three-to five-percent target range.

“Overall, the assessment continues to be that the average inflation for this year would likely fall within the target,” Tetangco stressed.

“That is also the same assessment that we have for next year. The average rate next year is projected to fall within the target of two to four percent next year,” he added.

The central bank, during its last policy meeting on June 19, kept key rates steady as the inflation outlook remain within target.

Monetary authorities will revisit policy settings on July 31, but Tetangco pointed out inflation easing in June will only be one of the many factors that will be considered before adjusting any policy levers.

“We’re not committed to a preset policy… We’ll continue to monitor and see if this (June inflation print) is going to materially alter the inflation forecast that we have,” Tetangco said.

“But given this, we have a number of tools that are available to us and these are always on the table. If and when there’s a need to use them, then we will not hesitate to adjust policy settings,” he added.

The BSP’s Monetary Board has maintained rates steady since the start of the year but reserve requirement ratios of banks have been hiked by a total of two percentage points to mop up excess liquidity growth.

The rate on the special deposit account (SDA) facility has also been raised by 25 basis points to 2.25 percent to rein in the persisting high liquidity growth.

Tetangco said the central bank will be looking at domestic and global developments and how these would affect the inflation expectations and the country’s financial stability during the next policy meeting.

“We’re also looking at the shift in risk appetites that can impact financial markets, geopolitical risks, that can affect commodity prices, and on the domestic side, we continue to focus on the behavior of liquidity and the domestic financial markets, particularly the foreign exchange market and the bond market and how these can be affected by developments overseas,” Tetangco said.