Bangko Sentral sees 'more manageable' inflation in 2019

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) expects inflation to fall within the government's target band, as price pressures continue to recede.

In a press briefing on Thursday, February 7, the central bank said it expects inflation to settle within 2% to 4% for 2019 and 2020, amid international crude oil prices declining and supply conditions of key food items returning to normal.

The central bank slightly adjusted its full-year inflation forecast for 2019, now at 3.1% from 3.2%. It projected inflation for 2020 to further ease to 3%.

"Inflation expectations have also declined further and are now aligned to the inflation target," BSP Deputy Governor Diwa Guinigundo said.

Due to the current and projected market conditions and a "more manageable inflation environment," the BSP Monetary Board also decided to keep policy rates steady.

The overnight reverse repurchase facility was unchanged at 4.75%. Interest rates on the overnight lending and deposit facilities were held steady at 5.25% and 4.25%, respectively.

Guinigundo did not tackle the possibility of cutting the reserve requirement ratio (RRR) or the minimum amount of reserves that banks must hold on to rather than lend or invest.

BSP Governor Nestor Espenilla Jr previously said that further reduction of the RRR was likely amid low inflation.

Cutting the RRR adds liquidity to the financial system.

Inflation soared to as high as 6.7% in 2018. The full-year average was 5.2%, the highest in almost a decade.

The high inflation prompted the BSP to hike interest rates 5 times last year to restrain market expectations, but affected consumer loans. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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