BSP stays put on policy stance

As GDP growth picks up in Q4 

MANILA, Philippines – The robust economic growth in the fourth quarter as well as the wait-and-see attitude of the US Federal Reserve gives authorities enough space to keep the country’s monetary policy stance, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Amando Tetangco Jr. said there is no need to tweak interest rates as the country’s monetary policy stance remains appropriate.

The country’s gross domestic product (GDP) growth accelerated to 6.3 percent in the fourth quarter last year from the revised 6.1 percent in the third quarter due to improved government spending and robust domestic demand.

This brought the GDP expansion to 5.8 percent last year, slower compared to 6.1 percent in 2014.

The country missed the seven to eightpercent GDP growth target penned by economic managers for 2015.

 “The Fed’s wait and see tone reflects the changing global dynamics. For us, we continue to see no need to adjust policy settings at the moment, given the healthy fourth quarter GDP figure of 6.3 percent and an inflation outlook of a slow creep to within target over the policy horizon,” Tetangco said.

The US Fed is expected to take its time in raising interest rates after tweaking them for the first time in almost a decade last month when it jacked up its near zero rates by 25 basis points.

The BSP chief also cited the country’s benign inflation environment.

Inflation eased to a 20-year low of 1.4 percent last year from 4.1 percent in 2014 amid stable food prices and cheaper utility rates brought about by the continued slide in oil prices.

Inflation is projected to return gradually to the two percent to four percent target for 2016 and 2017.

Upside risks to inflation include the pending petitions for power rate adjustments and the impact of protracted El Niño weather conditions on food prices and utility rates, while the continued weakness in the global economy serves as the key downside risk to inflation.

Last month, the BSP adjusted its inflation forecasts to 2.4 percent instead of 2.3 percent for 2016 and to 3.2 percent instead of 2.9 percent for 2017 due to the higher inflation in November, the impact of the weakening pesos against the dollar, and the increasing price of key commodities due to weather disturbances.

The recent minimum fare rollback to P7 for jeepneys as well as the continued decline in oil prices would be factored in the review of the BSP’s inflation forecast.