Philippines Holds Rate With Economy Supported by Consumption

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The Philippines left its benchmark interest rate unchanged for a sixth straight meeting after the economy grew at it slowest pace in more than three years, with the central bank saying there’s no need for 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 15 economists surveyed by Bloomberg. Policy makers also held the rate on so-called special deposit accounts at 2.5 percent.

The Philippines has refrained from joining more than 30 central banks that have provided monetary stimulus this year. President Benigno Aquino, who steps down in June 2016, is accelerating investment in airports and roads to spur expansion to as much as 8 percent this year and next.

“Domestic demand remains firm and does not require help from the central bank,” said Trinh Nguyen, a Hong Kong-based economist at HSBC Holdings Plc. “There is plenty of space for fiscal policy to step in to support growth,” she said, adding that rates may remain unchanged for the rest of the year.

The economy expanded 5.2 percent in the first quarter from a year earlier. Domestic demand conditions remain firm, there’s ample liquidity, and higher public spending will support growth, Governor Amando Tetangco said at a briefing today. Monetary policy remains “appropriately calibrated,” he said.

The peso closed little changed ahead of the decision, while the benchmark stock index fell 0.8 percent.

Ample Room

The central bank has ample room to adjust its stance if needed, BSP Managing Director Francis Dakila said. There is no need to add monetary stimulus, Director Zeno Abenoja said.

Consumer prices rose 1.6 percent in May from a year earlier, the slowest pace since at least 1998. While more than half the nation’s provinces have been affected by a dry spell brought on by El Nino, the central bank today said inflation will settle in the lower half of its target range.

The monetary authority cut its inflation forecast for 2015 to 2.1 percent and for 2016 to 2.5 percent.

“Inflation is absolutely at all-time lows and there’s ample liquidity,” said Patrick Ella, an economist at Security Bank Corp. in Manila. At its next policy meeting, the BSP may turn its attention to what the Federal Reserve might do, he said.