MANILA :The Philippine central bank left key interest rates steady on Thursday to shore up a domestic economy facing risks from global uncertainties, but it raised inflation forecasts and highlighted its readiness to temper increasing price pressures.
The Bangko Sentral ng Pilipinas (BSP) kept the rate on the overnight reverse repurchase facility at 2.0per cent for an eleventh straight policy meeting, as predicted by all 17 economists in a March 15-21 Reuters poll.
The interest rates on the overnight deposit and lending facilities were likewise kept at 1.5per cent and 2.5per cent, respectively.
“The Monetary Board sees scope to maintain the BSP’s policy settings in order to safeguard the momentum of economic recovery amid increased uncertainty, even as it continues to develop its plans for the gradual normalisation of its extraordinary liquidity measures,” BSP Governor Benjamin Diokno said.
The Philippine peso was little changed against the U.S. dollar by 0755 GMT. The country’s main share index was up 1per cent.
Average inflation could breach the upper end of the 2per cent-4per cent target range in 2022 by reaching 4.3per cent, higher than the February forecast of 3.7per cent, Diokno said.
For 2023, average inflation was seen at 3.6per cent, higher than the previous projection of 3.3per cent.
Inflation held steady at a 16-month low of 3per cent in February as higher energy costs were offset by lower prices of some food items.
But the impact of high commodity prices, following Russia’s invasion of Ukraine, has been significantly felt in the Philippines – a net oil importer – triggering petitions from labour groups for higher wages and from transport groups to increase fares.
Diokno said on March 17 the BSP did not have to move in step with the monetary policy adjustments of the U.S. Federal Reserve, which has begun raising rates to counter risks from high inflation.
“As inflation accelerates, BSP runs the risk of losing a grip on inflation expectations and possibly falling behind the curve,” said Nicholas Mapa, a senior economist at ING.
The BSP was expected to hike rates by 50 basis points in the last quarter of the year to 2.50per cent, according to the March 15-21 poll, matching predictions in a Reuters survey in February.
But a significant minority of economists – eight of 17 – pencilled in a hike in the third quarter.
Amid growing expectations of BSP tightening later this year Diokno flagged a possible cut in banks’ reserve requirement ratio in the second half.
(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Jacqueline Wong and Bradley Perrett)