Philippines maintains policy rates; inflation deemed manageable

By Tali Rackner

Norfolk, Va., Feb. 6 - The Monetary Board of the Bangko Sentral ng Pilipinas decided to maintain the policy rate at its most recent meeting, according to minutes of the bank meeting released on Thursday.

The bank decided to keep its overnight borrowing rate at 3½% and its overnight lending rate at 5½%. The reserve requirement ratios were also maintained accordingly.

The board said its decision was based on its assessment of manageable inflation. While inflation has risen slightly due mainly to the recent increase in food prices on account of adverse weather conditions, latest baseline forecasts continue to indicate that the future inflation path is likely to stay within the target ranges of around 4% for 2014 and about 3% for 2015. Meanwhile, market expectations remain anchored to the inflation target over the policy horizon.

The balance of risks to the inflation outlook remains slightly weighted toward the upside given the pending petitions for adjustments in utility rates and the possible uptick in food prices, the release said.

The board also noted that while the global economy has become more challenging because of heightened financial market uncertainty following monetary policy adjustments in the U.S. and generalized concerns about the sustainability of growth in emerging economies, domestic economic activity is likely to stay firm. Sound fundamentals such as buoyant demand, strong fiscal and external positions as well as favorable consumer and business sentiment would support the economy.

Going forward, the bank said it will continue to closely monitor and assess evolving growth and liquidity conditions and will consider policy adjustments, when needed, to ensure continued price and financial stability.

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