Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Thursday the current overnight borrowing and lending rates remain appropriate, after the gross domestic product grew 6.3 percent year-on-year in the fourth quarter.
“For us, we continue to see no need to adjust policy settings at the moment, given the healthy fourth-quarter GDP figure of 6.3 percent and an inflation outlook of a slow creep to within target over the policy horizon,” Tetangco said in a text message Thursday.
“We will be monitoring developments, particularly any new policy actions from Chinese authorities, oil price movements and market reactions to these, to see if any need to tweak policy levers,” he said.
The manageable inflation environment prompted the Monetary Board, the policy making body of Bangko Sentral, to keep the benchmark interest rates steady in its last meeting on Dec. 17. Key policy rates were maintained at 4 percent for overnight borrowing and 6 percent for overnight lending.
Tetangco said inflation rate likely slowed to as low as 0.8 percent in January from 1.5 percent in December.
“The BSP forecasts January inflation could settle within the 0.8 percent to 1.6 percent range. The decline in power rates, lower domestic oil prices and downward adjustment in the minimum jeepney fare could offset the slight uptick in rice prices as well as the annual sin tax adjustments,” Tetangco said in a text message.
“The BSP will continue to monitor closely evolving price conditions in line with the BSP’s commitment to price stability conducive to balanced and sustained economic growth,” he said.
Inflation in 2015 averaged 1.4 percent, below the government’s official target of 2 percent to 4 percent for the year.
The inter-agency Development Budget Coordination Committee also kept the inflation target at 2 percent to 4 percent from 2016 to 2018.
Bangko Sentral forecast that inflation would average 2.4 percent in 2016 and 3.2 percent in 2017.
British bank Standard Chartered said in a news briefing in Makati City the average inflation this year would accelerate to 2.2 percent from 1.4 percent in 2015. It will further accelerate to 2.9 percent in 2017, it said.
Tetangco said the latest action of US Federal Reserve to keep interest rates unchanged on Wednesday would be good for global financial markets, including the Philippines.
“The Fed’s statement affirms that authorities today really need to consider both domestic and external conditions when crafting policy and that the feedback between financial and real sectors is a present concern,” Tetangco said.
“Global markets seem to have priced in the Fed actions, and our own financial markets seem to also have appreciated the pause by the Fed,” he said.
