BSP keeps rates steady

By Lawrence Agcaoili (The Philippine Star)
Updated February 10, 2017 – 12:00am
http://www.philstar.com/business/2017/02/10/1670656/bsp-keeps-rates-steady

BSP officer-in-charge Nestor Espenilla Jr. said the central bank’s Monetary Board had decided to maintain policy rates at 3.5 percent for the overnight lending facility, three percent for the overnight reverse repurchase facility, and 2.5 percent for the overnight deposit facility.

He said the BSP also left the reserve requirement ratios unchanged at 20 percent.

Espenilla said the decision was based on its assessment of inflation dynamics and the risks to inflation outlook over the policy horizon.

Furthermore, he explained the body also noted the balance of risks surrounding the inflation outlook continues to be weighted toward the upside amid possible adjustments in electricity rates as well as the initial impact of the government’s broad fiscal reform program.

According to Espenilla, uncertainty over global growth prospects continues to pose a key downside risk to the inflation outlook.

“The Monetary Board stressed that while the global economic environment has become more challenging due to expected shifts in macroeconomic policies in advanced economies, domestic economic activity is expected to stay firm, supported by buoyant household consumption and private investment, increased fiscal spending, and ample credit and liquidity,” he said.

The US Federal Reserve decided to keep interest rates unchanged last month after raising benchmark rates by another 25 basis points last December.

Inflation kicked up to 2.7 percent in January, its highest in over two years, from two percent in December, but was still within the two to four percent target set by the BSP between 2017 and 2020.

“While inflation has risen due to the recent increases in food and oil prices, latest baseline forecasts continue to indicate that the future inflation path will remain within the target range,” Espenilla said.