BSP keeps rates steady but hikes inflation forecasts

by Philippine Daily Inquirer, Aug 11, 2017

Monetary authorities yesterday kept key policy rates steady but slightly raised inflation forecasts for the next three years mainly on expectations of higher oil prices.

In a press conference after the Monetary Board meeting yesterday, Bangko Sentral ng Pilipinas Governor Nestor A. Espenilla Jr. said the BSP’s policy-setting body maintained the policy rate or the overnight reverse repurchase (RRP) facility at 3 percent.

The overnight lending and deposit facilities as well as the reserve requirement ratios were also unchanged.

“The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable. While inflation forecasts have risen slightly due to the recent increase in global oil prices, the future inflation path continues to be within the target for 2017-2019,” Espenilla said.

BSP Deputy Governor Diwa C. Guinigundo said they slightly jacked up their yearly inflation forecasts for 2017 to 2019.

For 2017, the forecast was increased to 3.2 percent from 3.1 percent previously; 3.2 percent from 3 percent previously for 2018, and 3.1 percent from 3 percent for 2019.

Guinigundo said that besides expectations of higher petroleum prices, the increase in domestic liquidity as well as the peso’s depreciation would push the rate of increase in prices of basic goods faster.

But Espenilla said “inflation expectations remain firmly anchored close to the midpoint of the government’s 2-4 percent target over the policy horizon.”

As of the end of July, inflation averaged 3.1 percent, within the government’s target range for 2017.

According to Espenilla, “the Monetary Board also recognizes that the balance of risks to the inflation outlook continues to be on the upside.” —BEN O. DE VERA