
MANILA - The Philippine central bank held its benchmark interest rate steady, as expected, saying prudent monetary policy is needed given global headwinds and actions by other policymakers.
The policy-making Monetary Board on Thursday voted to keep the overnight borrowing rate unchanged at 3%. It also kept the upper and lower band of its interest rate corridor at 3.5% and 2.5%, respectively.
"Increased uncertainty over prospects for growth and monetary action in major advanced economies requires prudence in policy settings," Bangko Sentral ng Pilipinas governor Amando Tetangco told a media briefing.
All 15 analysts polled by Reuters expected the central bank to leave interest rate corridor settings steady, due to the country's strong growth and tame inflation.
"In short, the central bank is under no pressure to cut rates to support the economy," Capital Economics said, noting that it "remains in good shape" and growth likely accelerated in the second quarter.
The monetary policy stance has not been changed since a 25 basis point rate hike in September 2014.
On June 3, the central bank moved to an interest rate corridor system to make the transmission of monetary policy faster. It also introduced a term deposit facility to better manage liquidity in the financial system.
Comfort on inflation
Inflation in the Philippines remains comfortable, below the bottom end of the central bank's 2-4% target, and analysts do not expect the ceiling to be breached.
The central bank on Thursday lowered its inflation forecast for this year to 1.8%, from 2%, and for next year to 2.9% from 3.1%, due to lower prices of oil and weak global growth.
"Slower global economic activity remains the key downside risk to the inflation outlook," Tetangco said.
Some analysts expect the central bank to stand pat on rates for the rest of the year, with a first rate hike likely in 2017's first half.
An adjustment in the reserve requirement ratio, they say, will probably happen once the central bank has mopped up excess liquidity through its term deposit facility.
Deputy governor Diwa Guinigundo echoed that, saying now is not the proper time to cut banks' required reserves. The reserve requirement ratio is currently 20%.
Second-quarter growth will be announced on Aug 18. The annual pace could hit 7%, according to Philippine President Rodrigo Duterte's economic managers, slightly faster than the previous period's 6.9%, due in part to spending before the May 9 election.