Philippine central bank keeps interest rate on hold, likely to stand pat for sometime

The Philippine central bank kept its overnight RRP rate on hold at 4.75 percent during its monetary policy meeting today, as was anticipated. Accordingly, the BSP also left the overall interest rate corridor unchanged.

The central bank has continued to keep the view that the risks to its 2019 inflation forecast are balanced while the risks to the 2020 forecast are to the downside in the midst of a more uncertain global economic environment. The BSP cut their inflation forecast for 2019 a bit to 3.1 percent, contingent on a lower oil price projection of USD 61/bbl.

The recent fall in core inflation to 4.4 percent year-on-year in January implies that underlying pressures are also moderating in line with some easing in domestic demand. This is an encouraging development and gives a greater confidence that the BSP’s inflation target for 2019 will be achieved, noted ANZ in a research report.

In all, the Philippine central bank is expected to stand pat for a while as the economy adjusts to the tightening undertaken in 2018.

“BSP again noted that they will remain vigilant and is prepared to take appropriate action to safeguard its price and financial stability objectives, suggesting that they will not be looking to unwind some of last year’s hikes even if inflation continues to moderate further”, added ANZ.