BSP keeps key rates steady

MANILA, Philippines - The Bangko Sentral ng Pilipinas decided yesterday to keep its key rates steady,   with inflation expected to remain manageable in the near-term.

BSP Governor Amando M. Tetangco Jr. said the overnight borrowing and overnight lending rates have been left unchanged at four percent and six percent, respectively.

The interest rate on the reverse repurchase, repurchase and the special deposit account facility and the reserve requirement ratios were also maintained.

“The Monetary Board’s decision is based on its assessment of a more manageable inflation environment, based on latest baseline projections indicating within-target inflation for the policy horizon,” Tetangco said.

“Latest forecasts show a lower inflation path for 2014 to 2016, reflecting easing pressures on commodity prices. At the same time, domestic demand conditions continue to be resilient, supported by adequate domestic liquidity and robust bank lending growth,” Tetangco said.

The central bank cut its forecast average inflation to 4.4 percent for this year from 4.5 percent, and to 3.7 percent for 2015 from 3.8 percent. The BSP also now forecasts inflation to average 2.8 percent in 2016, down from a previous projection of three percent.

The BSP has a three to five percent target for inflation this year and a two to four percent goal for 2015 and 2016.

“The Monetary Board noted that the risks to the inflation outlook are broadly balanced, with potential price pressures emanating from pending petitions for adjustments in utility rates and possible power shortages,” Tetangco said.

The BSP earlier increased the key policy rates for a total of 50 basis points to ensure inflation remains within target. Upward revisions on the reserve requirement ratios and the SDA facility were also done to rein in excess liquidity growth.

“The Monetary Board emphasized that the BSP will remain vigilant against developments that could affect the outlook for inflation and financial stability and is prepared to take appropriate policy action as necessary to safeguard its price and financial stability objectives,” he Tetangco said.