BSP keeps interest rates steady as inflation stabilizes

ABS-CBN News

Posted at Jun 20 2019 04:08 PM | Updated as of Jun 20 2019 06:13 PM

MANILA - The Bangko Sentral ng Pilipinas kept interest rates steady on Thursday, with inflation seen stabilizing.

The Monetary Board kept the overnight borrowing rate at 4.5 percent after a 25-basis point reduction in the previous meeting last May.

At the same time, the BSP also lowered its inflation forecast to 2.7 percent for 2019 and 3 percent for 2020, citing the strength of the peso and a decline in world oil prices.

The BSP's previous forecast was for 2.9 percent inflation this year and 3.1 percent next year.

Inflation quickened in May to 3.2 percent from 3 percent in April, but stayed within the central bank's 2-4 percent target range.

BSP Governor Benjamin Diokno said inflation expectations had moderated further.

"At the same time the monetary board observed that the risk to the inflation outlook are broadly balanced for 2019 and 2020," Diokno said.

Sixteen of 24 economists in a Bloomberg poll predicted a rate cut.

BSP Deputy Governor Diwa Guinigundo however said "a pause in monetary policy is prudent."

"We don't know yet how the previous easing of monetary policy will work its way through the rest of the financial system and the real sector. So what is prudent is for the monetary board to take pause and see and monitor how it is going to fan out," Guinigundo said.

The BSP raised its benchmark rate by 175 basis points in 2018 to contain inflation that hovered at that time near 10-year highs.