BSP keeps interest rates unchanged in last policy meeting of 2018

After five consecutive rate hikes, the Bangko Sentral ng Pilipinas (BSP) decided to keep key policy rates unchanged during its last policy meeting for 2018.

The overnight borrowing rate was kept at 4.75 percent, the overnight lending rate at 5.25 percent, and the overnight deposit rate at 4.25 percent.

The BSP revised its inflation forecast for 2018 to 5.2 percent from a previous outlook of 5.3 percent.

It also issued a slower inflation forecast for 2019 at 3.18 percent from 3.5 percent, and for 2020 at 3.04 percent from 3.3 percent.

The headline inflation readings in November indicate signs of receding price pressures as food and oil prices have declined.

“Even if oil prices were to rise significantly from where they are today, we’re still anticipating that inflation will be within target,” Dakila said.

The policy-setting Monetary Board (MB) has raised rates in its five consecutive meetings for a cumulative increase of 175 basis points this year in light of inflationary concerns.

The BSP hinted in October it was taking a pause from policy adjustments if inflation proved to be on the wane.

Capital Economics Asia economist Alex Holmes said the latest BSP move could signify the end of rising interest rate regime.

“The central bank in the Philippines today left interest rates on hold, and we suspect this marks the end of the tightening cycle,” said Holmes.

“With inflation set to drop back sharply over the coming months, we suspect the next move will be a rate cut,” Holmes added.

Capital Economics mirrored the BSP outlook that inflation is likely to slow down in the coming months.

“We suspect inflation will fall back further over the coming months, as food and energy price inflation continue to moderate,” Holmes noted.

“If we are right, then the central bank is unlikely to raise interest rates again next year,” he added.—VDS, GMA News