BSP maintains key policy rates

MANILA, Philippines – The Philippine central bank maintained key policy rates at 4% for the overnight borrowing and 6% for overnight lending, while the interest rates on special deposit accounts and the reserve requirement ratios were also unchanged.

The Bangko Sentral ng Pilipinas (BSP) also cut its 2014 inflation forecast to 4.2% from 4.4% this year, and to 3% from 3.7% for 2015.

The central bank also downgraded its 2016 estimate to 2.6% from 2.8%.

While inflation continues to be manageable and risks to the price-gains outlook is “broadly balanced,” risks such as potential power shortages and tariff increases are still looming, the BSP noted.

Lower food and local petroleum prices, along with electricity rates, pulled down inflation in November to lowest at 3.7%, the National Economic and Development Authority (NEDA) reported on December 5.

Inflation also went down for the 2nd consecutive month to 4.3% in October.

The monetary board previously raised the key rates by 25 basis points in both July and September in an attempt to stave off higher inflation.

BSP said that the latest baseline forecasts show a lower inflation path for 2014-2016 relative to the previous policy meeting, reflecting in large part the subdued outlook for global commodity prices.

The output growth also slowed down in the 3rd quarter as agricultural production contracted due to adverse weather conditions and low public spending.

Prospects for domestic activity also continue to be firm, supported by strong domestic demand, robust bank lending growth, and buoyant business sentiment, the BSP added.

BSP Governor Amando Tetangco Jr also said the central bank’s efforts to maintain macroeconomic stability made the economy more resilient in the face of challenges essentially coming from the external sector.

“The monetary authority is prepared to take appropriate measures as needed,” Tetangco said. – Rappler.com, with reports from Agence France-Presse