Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, kept its benchmark interest rate unchanged at 3.0 percent and said it expects inflation to remain within its target range this year and 2018 despite the recent increases in food and oil prices.
BSP, which in June last year lowered its overnight reverse repurchase (RRR) by 100 basis points to 3.0 percent as part of a shift to an interest corridor system, added the balance of risks surrounding the inflation outlook continue to be to the upside given possible changes to electricity rates and the government's fiscal reform.
“Meanwhile, uncertainty over global growth prospects continues to pose a key downside risk to the inflation outlook,” the central bank said.
Inflation in the Philippines rose to 2.7 percent in January, the highest since December 2014, but remains within the BSP's target range of 3.0 percent, plus/minus 1 percentage point.
Inflation expectations are in line with the target, BSP added.
The economy of the Philippines expanded by an annual rate of 6.6 percent in the fourth quarter of 2016, down from 7 percent in the preceding two quarters, and is expected to remain firm, helped by buoyant household consumption and private investment.
Earlier this month the country's economic planning secretary, Ernesto Pernia, said the government was confident of hitting its 2017 growth target of 6.5-7.5 percent.
However, the central bank also “stressed” that the global economic environment had become more challenging due to expected shifts in the policies of advanced economies and the normalization of U.S monetary policy.
The Philippine peso has been trending downward against the U.S dollar since the “taper tantrum” of April 2013 but has been stable since November last year. Today the peso was trading at 49.9 to the dollar, largely unchanged from 49.6 at the start of this year.
Bangko Sentral ng Pilipinas issued the following statement: