BSP keeps policy rates unchanged

The central bank decided to keep policy settings unchanged during its first policy meeting of the year, as inflation is expected to take a lower path over the policy horizon.

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

“The Monetary Board’s decision is based on its assessment of a more manageable inflation environment,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla, Jr. said in a statement.

The statement was read by Deputy Governor Diwa Guinigundo in a press conference at the BSP headquarters on Thursday.

“Latest baseline inflation forecasts show inflation settling within the target band of 3.0 percent ± 1.0 percentage point for 2019 to 2020, as price pressures continue to recede due to the decline in international crude oil prices and the normalization of supply conditions for key food items.”

The BSP now expects Dubai crude oil prices at $51.31 per barrel this year from an earlier assumption of $69.41 per barrel.

This led the central bank to lower its inflation forecast for 2019 at 3.07 percent from 3.18 percent previously.

It also lowered its 2020 inflation forecast to 2.98 percent from 3.04 percent set during the policy meeting in December.

The BSP noted there are negative base effects expected in January to April this year.

“At the same time, domestic demand conditions have remained firm, supported by a projected recovery in household spending and sustained implementation of the government’s infrastructure program,” Espenilla said.

BSP Managing Director Francisco Dakila Jr. noted inflation is expected to fall below 4 percent in the first quarter.

“We still continue to expect that inflation could settle below 4 percent in March this year,” he said.

“Given these considerations, the Monetary Board deems the prevailing monetary policy settings to be appropriate, as previous monetary responses continue to work their way through the economy,” Espenilla added. —VDS, GMA News