THE Philippine central bank is mindful that oil prices can be volatile and cheaper crude won’t necessarily prompt interest-rate cuts, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said, signaling little change in monetary policy for months.
“Declining oil prices certainly give us some scope to keep rates steady,” Tetangco said in an interview on Friday. “Some people are asking why not reduce rates? But, you know, we need to be watchful of developments because oil prices can go up, as well.”
The BSP on Thursday held its benchmark rate at 4 percent as it cut inflation forecasts through 2016. Global policy-makers are weighing the impact of plunging oil prices on their economies, with oil-producing Norway on Thursday unexpectedly cutting rates as it faces an economic slowdown, while efforts to reduce fuel subsidies in Indonesia amid cheaper energy imports spurred monetary tightening last month.
“If there is no major change and if the risks to the inflation outlook remain balanced,” the Philippine central bank would be able to keep the current stance of monetary policy, Tetangco said.
“We think the inflation for this year up to 2016 will be within target ranges for these periods.”
Moodys’ Investors Service raised the Philippines’s sovereign rating to “Baa2” from “Baa3” on Thursday, putting the nation on par with Spain and higher than Indonesia.
The central bank on Thursday cut its forecast for inflation this year to 4.2 percent from 4.4 percent, and to 3 percent from 3.7 percent for 2015. It also lowered its 2016 estimate to 2.6 percent from 2.8 percent.
The peso fell 0.2 percent to 44.585 against the US dollar as of the noon trading break. The yield on 3.5-percent bonds due March 2021 rose 3 basis points to 3.53 percent, according to Tradition Financial Services.