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BSP says not time yet for lower rates

 

Inflation is on its way down, but not convincingly enough to cut rates.

The Bangko Sentral ng Pilipinas (BSP) voted to keep interest rates steady on Thursday, Feb. 7, marking the second time of staying on hold.

The Monetary Board said that while inflation is indeed going down, the rate must fall back to 2-4 percent before any adjustments are introduced.

“The Monetary Board’s decision is based on its assessment of a more manageable inflation environment. Latest baseline inflation forecasts show inflation settling within the target band of 3.0 percent ± 1.0 percentage point for 2019-2020, as price pressures continue to recede due to the decline in international crude oil prices and the normalization of supply conditions for key food items,” the BSP said.

“Meanwhile, the risks to the inflation outlook are seen to remain evenly balanced for 2019 while leaning toward the downside for 2020 given a more uncertain global economic environment, which in turn could temper potential upward pressures from commodity prices in the coming months.”

“The Monetary Board also emphasized that the BSP remains vigilant against developments that could affect the outlook for inflation and is prepared to take appropriate policy action as necessary to safeguard its price and financial stability objectives,” they added.

Despite drawing flak for some supposedly inflation-inducing remarks, market analysts correctly predicted the policy decision.

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