By Joann Villanueva/PNA
MANILA — The Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) on Thursday hiked key policy rates by an additional 25 basis points despite recent numbers indicating that inflation has steadied. This was the fourth increase this year, bringing rates to its highest level since March 2009.
The total of 175 basis points rise in the BSP’s key rates this year has brought the overnight reverse repurchase (RRP) facility rate to 4.75 percent.
In a briefing, Deputy Governor Maria Almazara Cyd Tuaño-Amador said the Board took note of upside risks to inflation outlook and elevated inflation expectations due to supply-side factor and possible wage pressure.
“At the same time, the Monetary Board believes that prospects for the domestic economy remain generally favorable and allow some scope for a measured adjustment in the policy rate to rein in inflation expectations and preempt further second-round effects,” she said.
For one, inflation last October is steady at 6.7 percent but average in the 10-month period is 5.1 percent, higher than the government’s two to four percent target band until 2020.
Tuaño-Amador said the Board “deemed it necessary to respond with pro-active policy action to help temper the risks to the inflation outlook.”
“Nevertheless, the Monetary Board continues to emphasize the need for follow-through non-monetary measures to mitigate the impact of supply-side factors on inflation,” she said, stressing that monetary officials remain “prepared to take appropriate policy actions as needed to ensure the achievement of its price and financial stability objectives.”
With the 175 basis points increase in the BSP rates to date Tuaño-Amador declined to give hints on the next rate decision of the Board in December.
She explained that “the central bank works on a comprehensive data set whenever it undertakes monetary policy decision.”
She also noted that the Board’s decision was based on country-specific circumstances, thus, “ actions of other central banks do not necessarily dictate the policy actions of the Monetary Board.”
The deputy governor, on the other hand, said that policy actions of the Federal Reserve “also tell on domestic policy actions “particularly because interest rate differentials are important factor behind capital flow movements and also down the road other economic prices including the exchange rates.”
She also cited that even if the third quarter output, as measured by gross domestic product (GDP), slowed to 6.1 percent from quarter-ago’s 6.2 percent this remains within the economy’s trend growth.
This level of expansion, she said, shows “a relatively resilient, relatively robust economy.”
“So, we think that the price stability objective can still be firmly safeguarded because the growth prospects of the economy continues to be optimistic,” she added.
