The Philippines held its benchmark interest rate for a fifth straight meeting as the prospect of faster economic growth this year reduces the need for monetary stimulus.
Bangko Sentral ng Pilipinas kept the rate it pays lenders for overnight deposits at 4 percent, it said in Manila Thursday, as predicted by all 17 economists surveyed by Bloomberg. Policy makers also held the rate on so-called special deposit accounts at 2.5 percent, as forecast by all 10 analysts.
The Philippines has held off from joining about 30 monetary authorities from Canada to Australia who have provided stimulus this year, with the World Bank forecasting growth in the Southeast Asian nation to accelerate in 2015. Deputy Governor Diwa Guinigundo said today the economy doesn’t need any additional support at this time, even as the central bank raised its inflation forecasts for this year and next.
“There’s no pressure on the central bank to cut rates,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “The drag on inflation coming from cheaper oil will have been erased” by the last quarter, when the monetary authority may raise the policy rate, he said.
The peso closed 0.4 percent higher at 44.54 against the dollar before the decision, the biggest gain in a month. The benchmark stock index climbed 0.3 percent.
The central bank raised its inflation forecast for this year to 2.3 percent and for next year to 2.6 percent, citing the El Nino weather pattern and a weaker peso. More than half the country’s provinces are suffering from a dry spell, and the return of an El Nino for the first time since 2010 was declared this week by Australia’s Bureau of Meteorology.
Domestic demand conditions remain robust, and there is ample liquidity and adequate government spending to support economic growth, the central bank said in a statement. Policy makers will watch for any impact from a move by the Federal Reserve to raise rates, as that may spur volatility and affect markets, Guinigundo said in a briefing.
“The growth momentum is intact amidst soft gains in CPI numbers,” Eugenia Victorino, Singapore-based economist at Australia and New Zealand Banking Group Ltd. said in a note. “We continue to expect the central bank to stand pat on its policy tools through 2015.”
President Benigno Aquino, who steps down in June 2016, is accelerating investment in airport and road projects to spur growth to as much as 8 percent this year and next. First-quarter gross domestic product data are due May 28.