MANILA -- Philippine monetary officials on Thursday kept key rates unchanged as expected as they forecast within-target inflation rate until 2021 and sustained firm domestic growth.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco Dakila Jr. said the policy-making Monetary Board (MB) cited that inflation is seen to remain within the government’s 2 percent to 4 percent target until 2021 despite the expected uptick in the near term because of the possible impact of the African swine fever outbreak on food prices, as well as the potential volatility of oil prices due to geopolitical issues in the Middle East.
Dakila said inflation outlook is tempered by the weak global economic prospects due to trade-related concerns overseas.
“Notwithstanding prospects in the global front, firm private domestic spending and sustained progress in policy reforms will serve as a buffer against external headwinds,” he said in a press briefing.
Dakila said members of the MB discounted any changes in the key rates since policy settings remain appropriate.
They instead decided to monitor the impact of the total of 75 basis points cut in the key rates at 25 basis points each last May, August and September, and the cuts in banks’ reserve requirement ratio (RRR), he said.
“The Monetary Board also trusts that the fiscal budget for 2020 will be passed within the year,” he added. “Going forward, the BSP will continue to monitor emerging price and output conditions to ensure that the monetary policy stance remains consistent with ensuring stable prices while supporting economic growth over the medium term.”
With the MB’s decision on Thursday, ANZ Research, in a report, expects the BSP’s key rates to be lowered by another 50 basis points next year.
ING Bank N.V. Manila branch senior economist Nicholas Mapa also forecasts up to 50 bps points cut in the BSP rates to help boost domestic expansion “given a possible miss on the growth objective.”
“Next year, the government will be chasing a higher growth target of 6.5-7.5 percent and BSP may likely need to shore up the fiscal stimulus while inflation dynamics allow them to do so,” he said.
Mapa also forecasts the continuation of the RRR cuts next year.
“Although the exact timing may still be in question, we are confident that any form of adjustments, both policy and operational, will be guided by data and will be effectively communicated to the markets,” he added. (PNA)
