The Monetary Board decided to pause after 5 straight interest rate hikes, keeping the overnight borrowing rate at 4.75% on Thursday, December 13.
Overnight lending and deposit facilities were also held steady.
The central bank lowered its 2018 inflation forecast to 5.2% from 5.3%.
The inflation projection for 2019 was also lowered to 3.18% from 3.5%, while inflation in 2020 is seen to ease further to 3% from the previous estimate of 3.3%.
“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. (READ: How high inflation exposed cracks in governance)
“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,” it added.
Raising interest rates discourages people from getting bank loans and encourages saving, thus helping ease inflation. It also shields the economy from speculative attacks in the market. – Rappler.com