BSP may adjust policy settings if needed

MANILA, Philippines - The Bangko Sentral ng Pilipinas said yesterday it may adjust policy settings if necessary following the announcement of a better-than-expected 6.9-percent economic growth in the fourth quarter of 2014.

“We will refresh our forecasts to include this new development, oil price expectations, shifts in interest differentials and global investment sentiment, and assess if there’s any change in the balance of risks to inflation, then formulate adjustments to policy stance as needed,” BSP Governor Amando M. Tetangco Jr. said.

The BSP in December decided to keep its key policy rates steady as inflation expectations fell within the target ranges until 2016.

The overnight borrowing and overnight lending rates were previously raised by a total of 50 basis points in the third quarter of last year to anchor inflation expectations.

Inflation averaged 4.1 percent last year, well-within the three- to four-percent target for 2014. The central bank has forecast the rate to average three percent this year and 2.6 percent in the next, also within the two to four-percent goals for both years.

The economy grew by 6.9 percent in the fourth quarter from a disappointing 5.3 percent expansion in the third quarter. However, the full-year growth of 6.1 percent was still short of the government’s 6.5 to 7.5 percent target for 2014.

“The rebound in Q4 GDP, which puts full year growth at 6.1 percent reflects yet again the underlying strength of domestic aggregate demand,” Tetangco stressed.

Emilio S. Neri, Jr., lead economist at the Bank of the Philippine Islands, said the recent economic data shows the BSP is not inclined to ease key policy rates especially amid the falling oil prices.