Steady policy rates seen until August

MANILA – Monetary Board Member Felipe M. Medalla forecasts a steady policy rate for the Bangko Sentral ng Pilipinas (BSP) until August 2019 on the back of policy indicators remaining stable at the moment.

During the “Conference on Gearing Up for External Competitiveness” held at the central bank office in Manila, Medalla said inflation is expected to continue decelerating after hitting record-high levels in 2018.

“Our inflation forecast is that inflation will go down because of base effects…it will even go down to two percent…But our own forecast is it will return back as long as all base effects disappear,” he said.

Thus, he forecasts unchanged policy rates “at least in the next two meetings (of the Monetary Board).”

The rate of price increases peaked at 6.7 percent in September and October last year due to supply-side factors.

However, the six-month slide was interrupted last May after inflation rose to 3.2 percent due to uptick in the heavily-weighted food and non-alcoholic beverages and the housing, water, electricity, gas and other fuels index.

Medalla said the current projection is that inflation will go back to “a little low three percent this year (and) a little high three percent next year.”

“And therefore there’s really no reason to change policy rates,” he said.

BSP’s policy-making Monetary Board (MB) cut the central bank’s key rates last May 9 as inflation outlook continues to be manageable.

BSP Governor Benjamin Diokno earlier said MB members considered the impact of the budget delays on the economy but also believe that domestic demand remain firm. (PNA)


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