Monetary policy stance remains appropriate – Tetangco

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said the country’s monetary policy stance remains appropriate amid the volatile global financial market brought about by the impending interest rate hike in the US.

BSP Governor Amando Tetangco Jr. said the country’s sound macroeconomic fundamentals on the back of the robust domestic demand and the benign financial environment outweigh the external headwinds from the planned interest rate increase by the US Federal Reserve.

“In our case, domestic conditions are such that you don’t see any need to adjust the stance of monetary policy at this time given a number of considerations,” he said.

He cited the benign inflation environment as it remained steady at 1.9 percent in July, bringing the average inflation in the first seven months of the year to 1.4 percent.

The BSP has set an inflation target of between two and four percent from 2016 to 2018.

“Inflation continues to be manageable and we expect it to move within the target range in 2017. This year, it could end up somewhat below the lower bound,” he added.

During the last rate-setting meeting of the BSP’s Monetary Board, authorities slashed its inflation forecast to 1.8 percent instead of two percent this year, and to 2.9 percent instead of 3.1 percent next year.

 Furthermore, the BSP chief said the country’s economy continued to grow at a robust pace, posting a faster gross domestic product (GDP) expansion of seven percent in the second quarter from 6.8 percent in the first quarter amid the boost from election related spending.

 This brought the GDP growth to 6.9 percent in the first half of the year from 5.5 percent in the same period last year. Economic managers have penned a slower GDP growth of six to seven percent instead of the revised 6.8 to 7.8 percent this year.

Tetangco also took note of the country’s favorable external payments position amid the return of capital inflows resulting to a net inflow of portfolio investments in recent weeks and months.