• BSP to update inflation estimates

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    The Bangko Sentral ng Pilipinas (BSP) said that it will update its inflation estimates on the account of domestic and global developments that may create price pressures in the country.

    “We will update our estimates of the inflation path over the policy horizon to reflect this new information,” BSP Governor Amando Tetangco Jr. said in a statement sent through a text message.

    The BSP governor’s statement followed after the release of the government’s inflation report, which showed that the inflation rate hit its two-year high at 4.2 percent in January.

    January inflation rate settled at the upper end of the central bank’s forecast range of 3.4 percent to 4.3 percent for the month.

    The monetary authority is seeing a higher inflation rate for 2014 at 4.5 percent, and 2015 at 3.2 percent, still within its 3-percent to 5-percent target band but higher compared to 2013’s average inflation rate of 3 percent.

    Tetangco added that the BSP will also continue to closely monitor global developments, including new data that have come out of or are to be released by the United States, Europe and emerging market economies—including China—to check for possible demand pressures building up.

    He also noted that domestic developments will also be closely monitored including any possible price surprises from ongoing talks on utility rates.

    Power distributor Manila Electric Co. was supposed to collect in three tranches the higher transmission charges in December and in February and March this year, but a Supreme Court 60-day temporary restraining order deferred the implementation of the December 2013 electricity rate hike.

    “We will also remain watchful if any general price pressures from movements in financial markets are brewing,” Tetangco said.

    The BSP governor also said that the monetary authority still have room to keep rates steady, however, given how factors play out, that room may be narrowing.

    The central bank has kept its key policy rates since October 25, 2012, wherein it reduced the interest rate for the reverse repurchase facility from 3.75 percent to 3.5 percent, while overnight lending or repurchase facility was retained at 5.5 percent. Reserve requirement ratios were kept steady as well.

    “We will see if any adjustments to the stance of policy are warranted based on the balance of these risks to the inflation outlook over our policy horizon,” he added.

    Inflation rate is one of the factors that the central bank takes into account in its policy-setting mandate, which influence the rates that local banks charge on their loans.

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