The Bangko Sentral ng Pilipinas (BSP) is likely to keep the current monetary policy settings unchanged for the most part of 2015 if existing economic and monetary conditions, both local and overseas, persist for some time.
BSP Governor Amando M. Tetangco Jr. said the seven-man policy-making body has adopted a wait-and-see stance as they continue to monitor economic data, unless going forward the numbers compel them to act otherwise.
“Right now, given the facts that we have, we think the monetary policy stance remains appropriate. And, if current conditions continue, then we’ll probably be able to maintain the policy stance for the most part of 2015,” Tetangco told reporters on Tuesday.
At present, the BSP borrows from and lends to the banks at only 4 percent and 6 percent, respectively. The central bank also maintains a special deposit account facility, where banks could earn interest income of another 2.5 percent. Several economists earlier said the BSP was likely to keep rates on hold until the September Monetary Board meeting, on account of the stable and low inflation. That monetary policy is widely divergent across central banks in Asia and around the world also helps the BSP keep its policy rates where they are.
Amid the policy guidance that rates can remain unchanged for “most of 2015”, Tetangco said things can change, depending on the impact of developments in advanced economies on capital flows to and from the country.
Tetangco also said the BSP is looking at how the volatility in capital flows impact domestic liquidity levels, which could alter the policy setting altogether.
“This is because liquidity is already going down. We also don’t want it to go down too much because we need to provide resources to the real economy,” Tetangco said of the need to carefully balance all the economic balls still bouncing in the air at the moment.
“But, at the same time, you got capital inflows, which serve to expand liquidity. Again, countervailing factors, so we need to watch that,” he quickly added.
The central bank will have its next monetary-policy meeting on March 26. This will be the second rate-setting meeting of the Monetary Board this year.
Previously, the BSP kept the monetary levers steady on the back of low inflation made possible by the steep decline in oil prices.
Latest data show inflation averaging 2.4 percent in January, which was a further deceleration from 2.7 percent in December, and from 4.2 percent in January last year.
This was also within the government target of 2-percent to 4-percent annual inflation for the year.