MANILA- - Philippine monetary officials on Thursday kept the Bangko Sentral ng Pilipinas' (BPS) key rates anew, citing the manageable inflation environment as supportive of growth.
However, the policy-making Monetary Board (MB) cut the inflation forecasts for 2017 and 2018 due to lower oil prices and slower growth of domestic liquidity or M3.
Thus, the central bank' overnight reverse repurchase (RRP) facility rate remains at three percent; repurchase (RP) rate at 3.5 percent; and the special deposit account (SDA) facility rate at 2.5 percent.
Rate of the reserve requirement for banks was also kept at 20 percent for universal and commercial banks (U/KBs).
BSP Governor Amando M. Tetangco Jr. , in a briefing Thursday, said the Board continued to see inflation manageable amid the upside risks, which included the impact of the possible approval of the tax reform proposal, possible increase in jeepney fare in areas outside of the National Capital Region (NCR) and of electricity rates.
"Lingering uncertainty over the prospects of the global economy, due in part, to possible shifts in macroeconomic policies in advanced economies, continues to pose a key downside risk to the inflation outlook," he said.
Tetangco said the Board "also noted the beneficial effects on inflation of the removal of quantitative restrictions on rice importation."
"The Board emphasized that domestic economic activity is projected to stay firm, supported by buoyant household consumption and private investment, increased government spending, and ample credit and liquidity," he said.
"With these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate. Looking ahead, the BSP will continue to monitor evolving economic conditions to ensure price and financial stability conducive to sustainable economic growth," he said.
During the same briefing, BSP Deputy Governor Diwa Guinigundo said inflation forecast for 2017 was at 3.4 percent from 3.5 percent set during the MB meeting last February while the 2018 figure was now at three percent from 3.1 percent.
He said M3 growth was one of the factors considered in the cut on the inflation projection along with lower prices of oil in the international market.
BSP data show that as January 2017, M3 grew at a slower pace of 12.4 percent year-on-year to Php 9.4 trillion from last December's 12.7 percent growth amid the sustained rise of banking lending.
Guinigundo also said possible impact of higher oil excise tax on inflation would be one-off and transitory, thus, it was not expected to bring in additional inflation pressure.
With these factors, Guinigundo said the Board did not see any need to institute any stimulus program as domestic expansion remained robust.
"We also expect strong domestic demand and that means there is very little need for additional monetary support or stimulus," he said.
Guinigundo also said that change in the reserve requirements for banks "remains a live issue", which the Board was "looking at very carefully."
He, however, said that cutting the reserve requirement was counter-intuitive because it would release additional liquidity in the economy.
Source: Philippines News Agency