benjamin diokno
This file photo shows BSP Governor Benjamin Diokno at a press conference.
Geremy Pintolo/File
BSP left policy rates unchanged as inflation stays 'benign'
Ian Nicolas Cigaral ( - December 12, 2019 - 9:06pm

MANILA, Philippines — The Bangko Sentral ng Pilipinas on Thursday kept its key rate unchanged, saying inflation continues to be “benign.”

At their final meeting for the year, BSP’s Monetary Board maintained the benchmark rate at 4%. The interest rates on the overnight deposit and lending facilities were likewise kept unchanged at 3.5% and 4.5%, respectively.

“The Monetary Board’s decision is based on its assessment of a benign inflation environment,” the central bank said.

“Upside risks to inflation over the near term emanate mainly from potential volatility in international oil prices amid geopolitical tensions in the Middle East as well as from the potential impact of the African Swine Fever outbreak and recent weather disturbances on domestic food prices,” it added.

Inflation snapped five consecutive months of downtrend and accelerated to 1.3% in November versus the preceding month’s 0.8%. Year-to-date, inflation averaged 2.5%, still within the government’s 2%-4% annual target.

Here’s what analysts say on the BSP’s decision:

“GDP will likely cling to the lower-end of the government’s 6.0-6.5% target with the Philippine economy needing stimulus from both the fiscal and monetary sides of the fence.  Given this outlook, we expect the BSP to cut its policy rate by 25 bps as early as the February 2020 meeting and ease by a total of 50 bps next year.” — Nicholas Mapa, senior economist at ING Bank

“We think today’s hold marks a pause rather than an end to the easing cycle. The BSP did not signal further easing at its press conference today, but at the same time gave no signal that it was closing the door to further rate cuts. The main reason we think the BSP will cut interest rates again is that growth is likely to disappoint.” — Alex Holmes, Asia economist at Capital Economics

“We remain less sanguine on overall growth as recent high-frequency data point to modest underlying fixed investment momentum, which is likely to remain soft in the coming quarters as the scope for a further acceleration in non-construction investment - which has driven the overall fixed investment cycle since late 2015 - looks increasingly limited even as the infrastructure recovery is well under way. This in turn skews the risks around growth next year to the downside.” — Nur Raisah Rasid, analyst at JP Morgan

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