BSP keeps key rate unchanged at 4.0%

Published December 12, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The central bank’s Monetary Board decided yesterday during its last policy meeting for the year to keep the policy rate unchanged at four percent on continued benign inflation outlook until 2021.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said inflation expectations remain well-anchored while the risks remain on the upside in 2020 and more on the downside in 2021.

The BSP also did not change its inflation forecast for 2019 until 2021. It remains at 2.4 percent this year and 2.9 percent for 2020 and 2021.

“Upside risks to inflation over the near term emanate mainly from potential volatility in international oil prices amid geopolitical tensions in the Middle East as well as from the potential impact of the African swine fever outbreak and recent weather disturbances on domestic food prices,” said Diokno. “However, uncertainty over trade policies in major economies continue to weigh down on global economic activity and demand and could thus mitigate upward pressures on commodity prices.”

But despite weak global economic prospects, the domestic economy will sustain its growth path due to “robust” domestic demand.

“Sustained policy support from increased fiscal spending, as well as improved domestic liquidity conditions owing to recent monetary adjustments, is also expected to support growth in the coming months,” Diokno.

With an unchanged overnight reverse repurchase or RRP facility at four percent, the interest rates on the overnight deposit and lending facilities were also kept unchanged at 3.5 percent and 4.5 percent, respectively.

The Monetary Board increased key rate by a total 74 basis points in 2019. It’s lower than the 175 bps adjustments in 2018 to curb high inflation at the time.