• BSP keeps key rates steady

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    Inflation forecasts also unchanged as economy seen ‘manageable’

    Monetary authorities decided to keep key interest rates unchanged at their third policy meeting for the year on Thursday, seeing no need to provide additional support for the economy as demand conditions remained firm.

    The decision not to change the benchmark rates has been widely expected, and is seen remaining as the policy stance of the central bank for the rest of the year.

     Photo shows (from left) bangko Sentral ng Pilipinas (bSP) Governor Amando Tetangco Jr., and bSP Deputy Governor Diwa Guinigundo during the bSP Monetary Policy Stance at the bSP Main Office on Thursday.  PHOTO BY ABBY PALMONES

    Photo shows (from left) bangko Sentral ng Pilipinas (bSP) Governor Amando Tetangco Jr., and bSP Deputy Governor Diwa Guinigundo during the bSP Monetary Policy Stance at the bSP Main Office on Thursday. PHOTO BY ABBY PALMONES

    The Bangko Sentral ng Pilipinas (BSP) kept its inflation forecast for the year at 2.1 percent, and for 2017 at 3.1 percent.

    The overnight lending, or repurchase rate (RP) stayed at 6.0 percent, while the overnight borrowing, or reverse repurchase rate (RRP) remained at 4.0 percent. The BSP also held the interest rate on special deposit accounts (SDA) steady at 2.5 percent and the reserve requirement ratio at 20 percent.

    “The Monetary Board’s decision is based on its assessment of a continuing manageable inflation environment,” BSP Governor Amando Tetangco Jr. said following the policy meeting.

    The latest forecast continues to indicate that average inflation is likely to settle within the target range of 3 percent plus or minus 1 percentage point for 2016 to 2017, Tetangco said.

    “The Monetary Board observed that inflation continues to be driven mainly by supply-side factors,” he added.

    The rise in consumer prices has slowed below the central bank’s 2 percent to 4 percent target, staying at 1.1 percent last month, unchanged from March.

    Inflation expectations, Tetangco said, have declined slightly due to low inflation readings in recent months but remain firmly within the inflation target band over the policy horizon.

    At the same time, the BSP said the overall balance of risks surrounding the inflation outlook remains tilted to the downside, with potential downward price pressures associated with slower-than-expected global economic activity and possible second-round effects from lower international oil prices.

    Nevertheless, upside risks to the inflation outlook could come from the impact of El Niño dry weather conditions on food prices and utility rates as well as pending petitions for power rate adjustments.

    “The Monetary Board also recognized that while global economic conditions have become weaker since the previous meeting [March23], prospects for domestic economic activity nevertheless remain robust, supported by solid private household consumption and investment buoyant business sentiment, and adequate credit and domestic liquidity,” Tetangco said.

    He added that higher fiscal spending is expected to further boost domestic demand.
    “Given these considerations, the BSP will continue to monitor emerging price and output conditions to ensure the consistency of the monetary policy stance with stable prices and sustainable economic growth,” he said.

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