The Philippines’ central bank kept its key overnight reverse repurchase rate (RRP) at 3.0 percent, as expected, saying inflation is still expected to remain within the government’s target range for 2018 and 2019 despite trending upwards on higher utility rates and fuel prices.
But Bangko Sentral ng Pilipinas (BSP), which has kept its monetary policy stance since September 2014 on “manageable” inflation, said the balance of risks to inflation continue “to lead toward the upside due to possible higher crude oil prices.”
In addition, a proposed tax reform and put temporary pressure on prices while a proposed reform in the rice industry and deregulation of rice imports could temper inflation.
Inflation in the Philippines rose to 3.5 percent in October from 3.4 percent in September, within the target range of 3.0 percent, plus/minus 1 percentage point.
On Monday the International Monetary Fund said the BSP’s monetary policy stance remained appropriate but it should be ready to tighten if there were signs of overheating. It also said plans to unwind banks’ high reserve requirements would help reduce macro financial risks but this should be done carefully to ensure that domestic liquidity is broadly unchanged.
The BSP said the outlook for domestic economic activity remains firm, supported by positive sentiment among consumers and business and while credit is expanding in line with output growth, the central bank said it remains watchful over the implications of liquidity and credit conditions for price and financial stability.
The Philippine economy expanded by an annual 6.5 percent in the second quarter, up from 6.4 percent in the first and the IMF forecast growth this year of 6.6 percent and 6.7 percent in 2018. Last year it grew 6.8 percent.
The Philippine peso has depreciated slowly this year although it has bounced back in the last few weeks. Today the peso was quoted at 51.26 to the U.S. dollar, down 3.2 percent this year.
Although the BSP’s monetary policy stance has been steady since September 2014, the RRP rate was lowered by 100 basis points last year when it adopted an interest corridor system.
Bangko Sentral ng Pilipinas (BSP) issued the following statement:
Philippines maintains rate, inflation seen in target