BSP puts brakes on interest hikes

CEBU, Philippines — The Bangko Sentral ng Pilipinas on Thursday kept interest rates steady for the first time after five straight hikes this year after inflation started to ease last month.

The Monetary Board kept the overnight borrowing rate, which banks use to price their loans, at 4.75 percent during its last meeting for the year Thursday.

The central bank also lowered its inflation forecasts to 5.2 percent this year, 3.18 percent in 2019 and 3.04 percent in 2020 from 5.3 percent, 3.5 percent and 3.3 percent, respectively.

The five successive rate increases raised the benchmark from just 3 percent at the start of the year.

Last month, inflation eased for the first time this year to 6 percent from 6.7 percent both in September and October.

Economic growth slowed to 6.1 percent in the third quarter dragged by weak consumption and fall in farm output.

"Recent headline inflation readings indicate signs of receding price pressures as constraints on food supply continue to ease with the implementation of various non-monetary measures," the BSP said in a statement.

Inflation expectations have also steadied given the decline in international crude oil prices and the stabilization of the peso.

Meanwhile, the risks to the inflation outlook have become more evenly balanced for 2019 and leans toward the downside for 2020 amid a more uncertain global economic environment, which could further mitigate upward pressures from commodity prices in the coming months.

"Given these considerations, the Monetary Board deemed it prudent for the time being to keep monetary policy settings steady and allow previous monetary responses to continue to work their way through the economy," the central bank noted.