Philippines Holds Key Interest Rate Steady at 4.5%

The central bank of the Philippines left its key overnight reverse repurchase facility rate unchanged at 4.5% on its June 20th 2019 meeting, while markets had expected it at 4.25%. Policymakers said the decision remains consistent with the manageable inflation outlook and firm domestic growth prospects, unveiling that a prudent pause allows it to observe and assess the impact of prior monetary adjustments. The bank noted the uptick in inflation to 3.2% in May from 3% in April, which is likely to be temporary and still within the 2-4% target range. Also, the BSP cut its inflation forecasts for 2019 to 2.7% from 2.9% and for 2020 to 3% from 3.1%, amid declining oil prices and the prospect of a stronger peso.
Bangko Sentral NG Pilipinas | Luisa Carvalho | 6/20/2019 11:09:37 AM
Statement by the Bangko Sentral NG Pilipinas:

At its meeting on monetary policy today, the Monetary Board decided to keep the interest rate on the BSP’s overnight reverse repurchase (RRP) facility unchanged at 4.50 percent. The interest rates on the overnight lending and deposit facilities were likewise held steady.

Latest baseline forecasts indicate that inflation remains likely to settle within the target range of 3.0 percent ± 1.0 percentage point for both 2019 and 2020, while inflation expectations have moderated further. The Monetary Board also noted that while real sector activity moderated in the first quarter of the year, overall domestic economic activity is likely to remain firm, supported by a projected recovery in household spending and the continued implementation of the government’s infrastructure spending program.

At the same time, the Monetary Board observed that the risks to the inflation outlook are broadly balanced for 2019 and 2020. Weaker global economic prospects amid a possible easing in global demand and increased trade tensions continue to temper the inflation outlook. The potential adverse effects of a prolonged El Niño episode remain a key upside risk to inflation.

On balance, therefore, the Monetary Board believes that the manageable inflation outlook and firm domestic growth prospects support keeping monetary policy settings steady for the time being. A prudent pause allows the BSP to observe and assess the impact of prior monetary adjustments including the phased reduction in the reserve requirements to be completed by the end of July. Going forward, the BSP will continue to monitor emerging price and output conditions to ensure that monetary policy remains in line with the BSP’s price stability objective while being supportive of economic growth.

Philippines Holds Key Interest Rate Steady at 4.5%