March 18, 2018, 10:04 am
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BSP holds key rates steady

As the country’s inflation environment is expected to remain manageable,  the policymaking body of the Bangko Sentral ng Pilipinas  yesterday moved to keep key rates steady.

The Bangko Sentral ng Pilipinas’s (BSP) overnight reverse repurchase (RRP) facility was kept at 3 percent.

The corresponding interest rates on the overnight lending and deposit facilities were also kept steady.

The reserve requirement ratios were likewise left unchanged.

Nestor Espenilla, BSP governor, said the Monetary Board’s decision was based on its assessment that “the inflation environment remains manageable.”

“Latest forecasts show the future inflation path will continue to be within the target range for 2017-2019,” Espenilla said.

The BSP’s inflation target range for this year up to 2019 is pegged at between 2 and 4 percent.

The latest forecast of the Monetary Board shows steady inflation at 3.2 percent up to 2019.

“The balance of risks to the inflation outlook also continues to be on the upside,” Espenilla said, adding that while the proposed tax reform program may exert potential transitory pressures on prices, “various social safety nets and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term.”

Espenilla said while prospects for global economic growth have stayed broadly upbeat, “geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continue to pose downside risks to external demand.”

But Espenilla stressed the outlook for domestic economic activity “remains firm, supported by positive consumer and business sentiment and ample liquidity.”

“As credit for production activities continues to expand in line with output growth, the economy’s absorptive capacity is likewise seen to improve, thus mitigating inflation pressures over the long run. Nonetheless, the Monetary Board remains watchful over evolving economic growth and liquidity conditions and their implications for price and financial stability,” Espenilla said.

“Based on these considerations, the Monetary Board believes that prevailing monetary policy settings continue to be appropriate,” Espenilla added.

Inflation continued with its upward trajectory as it settled at 3.1 percent last month, due to faster increases in heavily-weighted food and non-alcoholic beverages index which grew by 3.5 percent.

This was the fastest in three months. 

As of end-August, inflation averaged 3.1 percent, still within the government’s 2 to 4 percent target for 2017.
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