BSP maintains policy rates but hikes 2018 inflation forecast
MANILA, Philippines — As expected, the Bangko Sentral ng Pilipinas on Thursday has left its monetary policy settings unchanged amid upward pressures on consumer prices but sees inflation to overshoot its target for 2018.
At its first rate-setting meeting for 2018, the BSP’s Monetary Board kept the overnight reverse repurchase rate at record-low 3.0 percent. Corresponding rates on overnight lending and deposit facilities were also steadied.
Thursday’s policy statement made no mention of reserve requirement ratios imposed on banks.
Meanwhile, the BSP forecast inflation to breach its 2-4 percent target range for this year. The central bank’s estimate for 2018 was raised to 4.3 percent from 3.4 percent.
Inflation forecast for 2019 was also upwardly revised to 3.5 percent from 3.2 percent.
"The inflation path is expected to moderate," the BSP said in a statement.
“The Monetary Board observed that the risks to the inflation outlook remain weighted toward the upside owing mainly to price pressures emanating from possible further increased in global oil prices,” it added.
“At the same time, the Monetary Board saw that inflation expectations continue to be anchored within the inflation target band over the policy horizon. The BSP is watchful against any signs of second-round effects and inflation becoming broader based."
The BSP earlier vowed to take "timely action" after inflation exceeded forecasts and spiked at the fastest clip in more than three years in January amid building price pressures following the enactment of a new tax law.
Some economists expect the central bank to adjust monetary policy settings for the first time in over three years in its upcoming meetings, or at least signal a more hawkish tone at Thursday’s rate-setting meeting amid risks of an overheating economy.
As inflation remains manageable, the BSP has left policy settings unchanged since it hiked rates in September 2014 by 25 basis points.
“The Monetary Board reiterates that it remains committed to the BSP’s price stability objective and will continue to closely monitor the evolving conditions for prices and output for any threats to the inflation target,” the central bank said.
“The Monetary Board stands ready to take appropriate measures as necessary to ensure that the monetary policy stance continues to support price and financial stability,” it added.