Sufficient room to tweak rates – BSP

MANILA, Philippines - Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said yesterday the manageable inflation rate and strong economic growth provide “sufficient room” for monetary officials to adjust policy settings if need arises.

“Given the positive alignment between inflation growth and augmented government resources as a result of fiscal consolidation, both monetary and fiscal sectors have sufficient room to make policy adjustments as warranted,” Tetangco said during the Euromoney Philippines Investment Forum 2015 in Makati city.

Inflation stood at an average rate of 2.4 percent in the first two months of the year, within the government’s two- to four-percent target for this year. Tetangco said inflation expectations remain “well-anchored.”

At the same time, Tetangco said the economy is seen to continue to grow in a stable inflation environment.

“The government’s target of seven- to eight-percent (growth) is attainable as domestic demand remains firm and supported by brewing production efficiency and robust labor market dynamics,” Tetangco said.

Philippine economic growth decelerated to 6.1 percent last year from a strong 7.2 percent in 2013. The figure was also short of the government’s 6.5 to 7.5 percent target but was among the fastest in Asia during the period.

For this year and in 2016, the government hopes to grow the economy by seven to eight percent.

The central bank last month kept key policy rates steady as inflation was forecast to remain within the target bands for this year and the next. The overnight borrowing and overnight lending rates were last adjusted in the third quarter of last year, during which they were raised to anchor inflation expectations.

The next rate-setting meeting has been scheduled on Thursday.

Tetangco said the domestic economy should be able to sustain its strong growth amid the present sound macroeconomic fundamentals and the government’s commitment in continuing its structural reforms.

 “We are confident that we will be able to attain our goal of an upward economic growth trajectory in an environment of price and financial stability because we will remain proactive in policy dialogue with stakeholders..., preemptive in putting in place forward-looking policies, and prudent in adopting reforms,” Tetangco said.

However, he stressed this is not the time for “complacency” given the risks, mainly external, that may significantly impact the domestic economy.

Tetangco said these risks are the uneven economic growth across the globe, the swings in international oil prices, and the divergence in monetary policy settings among countries.