- Country's credit rating outlook raised to positive at Fitch
- Central bank increases 2016 inflation forecast to 2.6%
The Philippines left its benchmark interest rate unchanged for an eighth straight meeting, as the prospect of faster economic growth next 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 19 economists surveyed by Bloomberg. Policy makers also held the rate on so-called special deposit accounts at 2.5 percent, as forecast by all eight economists surveyed.
The decision contrasts with that of Taiwan, which lowered its policy rate for the first time since the global financial crisis as the strength of its currency and China’s slowdown dragged exports into a seven-month slump.
The Philippine central bank also considered the impending Federal Reserve rate increase, China’s growth slowdown, the state of the global economy and financial markets in its decision, its top officials said at Thursday’s policy briefing. Philippine economic growth will probably quicken to 6.3 percent in 2016 from an estimated 6 percent this year, the Asian Development Bank said this week even as it lowered the forecast for 2015.
"Despite a weak start to the year, the economy bounced back" in the second quarter, Gareth Leather, Asia economist for Capital Economics Ltd., said in a note after the decision. “Provided growth continues to recover as we expect over the remainder of the year, there will be little need for policy easing.”
Fitch Ratings raised the Philippines’ outlook to positive from stable Thursday, saying governance standards and competitiveness indicators have shown steady improvement and domestic demand remains robust. Governor Amando Tetangco said the country’s growth momentum and benign inflation gave the central bank room to keep policy unchanged.
“Monetary authorities are unlikely to touch the policy rate for the balance of the year because inflation probably won’t exceed 2 percent this year,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “I also don’t see how monetary policy will address a problem such as El Nino, which could be the main drag on economic growth. Fiscal authorities should play a bigger part in offsetting its effects.”
The Central Bank on Inflation, Peso
- While El Nino poses inflation risk, the government has initiated measures to mitigate the impact on agriculture including installing water pumps and cloud seeding in regions, BSP Deputy Governor Diwa Guinigundo said Thursday
- Peso is reflecting dynamics of the global economy and this is expected, Guinigundo said when asked about the peso’s weakness. "You don’t expect central banks in general to be responding to movements in the exchange rate on a daily basis."
- For inflation forecasts, click Philippines Raises 2016 Inflation Forecast; 2017 at 3%