The MB met yesterday and agreed to keep its overnight borrowing rate at 6.75 percent while its overnight lending rate stayed at nine percent.
According to the BSP, there were inflationary pressures but these were due to factors that were completely out of the influence sphere of monetary policies because much of the tension was spawned by supply-side factors.
"Monetary tightening restrains inflation pressures primarily by curbing aggregate demand," said BSP Deputy Governor Amando Tetangco Jr. "The direct impact on consumer goods of supply-side factors such oil prices, is on production costs rather than demand."
Tetangco said that although the MB expected upward pressure on inflation rate, it would be temporary and would not require monetary action.
"On the other hand, the application of non-monetary government measures such as timely importation, may help ease supply pressures on certain consumption goods," he said.
Tetangco added that historically, past episodes of supply-related inflation pressures showed that headline inflation tended to quickly recover its long-term trend after a brief upsurge.
Tetangco said the MB also did not have any reason to move immediately even if the US Federal Open Market Committee (FOMC) decides to increase its policy rates again.
"We don’t have to move immediately although if the FOMC raises its rates, we will have to reassess our positioning as we always do," Tetangco said.