MANILA, June 20 (Xinhua) -- The Monetary Board, the policy-making body of the Philippine central bank Bangko Sentral ng Pilipinas (BSP), decided on Thursday to keep the interest rate on the BSP's overnight reverse repurchase (RRP) facility unchanged at 4.50 percent as inflation moderated, BSP Governor Benjamin Diokno said.
The interest rates on the overnight lending and deposit facilities were likewise held steady, Diokno said.
"On balance, therefore, the Monetary Board believes that the manageable inflation outlook and firm domestic growth prospects support keeping monetary policy settings steady for the time being," Diokno said during a press conference.
"A prudent pause allows the BSP to observe and assess the impact of prior monetary adjustments including the phased reduction in the reserve requirements to be completed by the end of July," Diokno added.
Latest baseline forecasts indicate that inflation remains likely to settle within the target range of 3.0 percent plus or minus 1.0 percentage point for both 2019 and 2020, while inflation expectations have moderated further.
According to Diokno, the body also noted that while real sector activity moderated in the first quarter of the year, overall domestic economic activity is likely to remain firm, supported by a projected recovery in household spending and the continued implementation of the government's infrastructure spending program.
At the same time, he said the body observed that the risks to the inflation outlook are broadly balanced for 2019 and 2020.
"Weaker global economic prospects amid a possible easing in global demand and increased trade tensions continue to temper the inflation outlook. The potential adverse effects of a prolonged El Nino episode remain a key upside risk to inflation," he added.
The BSP expects even slower inflation over the next two years.
BSP Deputy Governor Diwa Guinigundo said inflation is now seen averaging 2.7 percent this year, down from the previous estimate of 2.9 percent. For 2021, he said prices are seen rising by 3 percent from the may forecast of 3.1 percent.
"There was indeed a downtrend in actual inflation," he said during the press conference, noting the decline in global oil prices and the stronger peso versus the dollar in recent weeks.
Going forward, the BSP officials said the BSP will continue to monitor emerging price and output conditions to ensure that monetary policy remains in line with the BSP's price stability objective while being supportive of economic growth.
In last May, the BSP reduced the interest rate on the BSP's overnight RRP facility by 25 basis points to 4.50 percent due to a decelerating trend in inflation.
