Philippines central bank maintains interest rate
In a briefing, Amando Tetangco Jr., BSP governor said, the policy-making Monetary Board decided to keep rates for overnight borrowing and lending unchanged at 4.50 percent and 6.50 percent, respectively.
The reserve requirement ratios were also kept steady at 21 percent.
"Latest average baseline forecasts show a lower inflation path, consistent with the 3 percent to 5 percent target range for 2011 to 2013, while inflation expectations remain well-contained, supported by easing commodity prices," Tetangco said.
He also said that the monetary authorities took into account the moderation in domestic economic growth as the global recovery has slowed down and as domestic public spending has been weaker than expected.
"The Monetary Board also believes that the risks surrounding the inflation outlook over the policy horizon are slightly tilted to the downside. The global economic outlook has become significantly more uncertain and financial markets continue to be vulnerable to interlocking sovereign debt and banking concerns in Europe. The expected moderation in external demand, which has also contributed to the slight pullback in international commodity prices, provides scope to pause and assess the outlook for inflation and growth," Tetangco said.
Tetangco added that the Board believed that the decision to maintain the policy stance was consistent with the emerging economic developments and the inflation outlook.
Baseline inflation forecast for this year was left at 4.46 percent.
For 2012, inflation forecast was lowered to 3.05 percent from 3.4 percent, and from 3.23 percent to 3 percent for 2013.
Diwa Guinigundo, BSP deputy governor said the major reason for the decline in the inflation forecast was attributed to the lower petroleum prices for 2012 from $ 104.75 billion per barrel to $95.40 per barrel and for 2013 from $102 per barrel to $ 92.82 per barrel.
"Of course the other underlying macroeconomic assumptions behind those numbers are the expected slowdown in the global economy. So that will also affect the movement in commodity prices. So as far as the inflation forecast is concern we're looking at lower inflation path for both 2012 and 2013," Guinigundo said.
While the inflation outlook is expected to be manageable, the BSP said that it will continue to be mindful of any remaining upside risks to inflation, including potential increases in liquidity due to sustained capital inflows.
"The BSP remains watchful over evolving price and output conditions, both on the global and domestic fronts, and will ensure that monetary policy settings remain appropriate," Tetangco said.
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