The Monetary Board has held key interest rates steady, saying the prevailing monetary policy settings remain appropriate.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno announced the board’s decision shortly after its meeting on Thursday, March 21, his first as central bank chief.
Diokno assumed his new role on March 7, succeeding the late central bank governor Nestor A. Espenilla, Jr. who had passed away.
He said the board decided to keep the interest rate on the BSP’s overnight reverse repurchase (RRP) facility unchanged at 4.75%.
The interest rates on the overnight lending and deposit facilities were likewise held steady.
“The Monetary Board’s decision is based on its assessment that prevailing monetary policy settings remain appropriate,” Diokno said.
Latest inflation forecasts show inflation settling within the 2% to 4% (3% ± 1.0 percentage point) target band for 2019 and 2020.
“Inflation pressures have eased further since the previous monetary policy meeting, reflecting mainly the decline in food prices amid improved supply conditions,” Diokno said.
Ahead of the meeting, Diokno said there was room to ease monetary policy given the decelerating inflation rate. He had also stressed, however, that any decision would be based on data and would be made by the board as a collegial body.
Headline inflation slowed down further to 3.8% in February 2019, moving back within the government’s target band for the first time in one year.
Diokno said the board has noted that the risks to the inflation outlook remained broadly balanced for 2019 even as it observed that further risks could emerge from prolonged El Niño and higher-than-expected increases in global oil and food prices.
“For 2020, the risks lean toward the downside as tighter global financial conditions and geopolitical risks temper global economic activity and potential upward pressures on commodity prices,” he said.
The board also noted risks to gross domestic product (GDP) growth if Congress fails to pass the 2019 budget.
Meanwhile, Diokno said the board observed that overall prospects for domestic activity continue to be firm, supported by a projected recovery in household spending and the continued implementation of the government’s infrastructure program.
“Given these considerations, the Monetary Board is of the view that the within-target inflation outlook and firm domestic growth support keeping monetary policy settings steady at this time,” Diokno said.
The board was compelled to raise policy rates five times in 2018 in a bid to curb inflation, which surged partly due to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law, increase in global oil prices and lack of rice supply in the domestic market. (Ventures Cebu)