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Philippines holds rate, inflation still seen in range
The Philippine central bank maintained its key policy rates, including the benchmark overnight borrowing rate at 4.0 percent, saying the latest forecast continue to indicate that inflation is likely to settle in the lower half of its target range this year and in 2016 and inflation expectations remain firmly anchored.
Bangko Sentral ng Pilipinas (BSP), which raised its rate by 50 basis points last year to curb inflation expectations, added that risks to inflation remained broadly balanced, with upside risks from pending rate changes to power and the impact of dry weather from El Nino on food and utility rates.
Downside risks to inflation arise from slower economic global economic growth, BSP said.
Inflation in the Philippines eased to 1.6 percent in May from 2.2 percent in April, slightly below the central bank's target range of 3.0 percent, plus/minus 1 percentage point.
Domestic demand in the Philippines continues to remain firm, supported solid spending by households and capital, and buoyant business confidence. Ample domestic liquidity and planned increase in public spending should further support domestic activity in the months ahead, BSP said.
The Philippine economy slowed by more than expected in the first quarter, triggering speculation that the BSP could ease rates. Gross Domestic Product expanded by only 0.3 percent from the fourth quarter, the weakest pace since the first quarter of 2009. Annual growth was 5.2 percent, down from 6.6 percent in the fourth quarter.
But BSP Governor Amando Tetangco has on several occasions – most recently June 18 – said he saw no need to cut rates as economic activity was expected to accelerate due to government spending on infrastructure and inflation expectations that are within the bank's target range.
Bangko Sentral ng Pilipinas issued the following statement:
Latest baseline forecasts continue to indicate that inflation is likely to settle within the lower half of the target range of 3.0 percent ± 1 percentage point for 2015-2016, while inflation expectations remain firmly anchored following recent inflation outturns.
The Monetary Board likewise observed that the risks to the inflation outlook continue to be broadly balanced, with upside risks coming from pending petitions for power rate adjustments and the impact of stronger-than-expected El Niño dry weather conditions on food prices and utility rates. On the other hand, slower global economic activity could pose downside risks to inflation.
Source: http://www.centralbanknews.info/2015/06/philippines-holds-rate-inflation-still.html
