Manila. The Philippine central bank on Thursday (09/11) left its key interest rate steady as expected and signaled it was in no rush to alter policy settings even as it forecast inflation to creep higher next year.
The benchmark rate was kept at 3.0 percent as inflation expectations "remain anchored" close to the midpoint of the 2-4 percent annual target for this year through 2019, it said.
The central bank also kept the reserve requirement ratios for banks unchanged, but officials said they were "crafting an exit strategy" for lowering it based on a number of factors including initiatives to deepen the domestic debt market.
Ten of 12 economists polled by Reuters had forecast no policy change on Thursday, while the other two projected a 25 basis point hike either this week or at the next meeting on Dec. 14 to keep overheating risks in check.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla told a media briefing the monetary board's decision "is based on its assessment that the outlook for the inflation environment remains manageable".
The annual inflation rate quickened to a three-year peak in October, but the 10-month average of 3.2 percent remained within the central bank's comfort range.
The central bank raised its 2018 forecast for average inflation to 3.4 percent from 3.2 percent, but it kept its 3.2 percent projection for both 2017 and 2019.
'Very Clear' View
Looking at the inflation forecasts, Diwa Guinigundo, central bank deputy governor, said "it's very clear there is very little reason for us to adjust monetary policy stance."
In contrast, Malaysia's central bank on Thursday held its benchmark rate but said changing domestic and global conditions mean it may review its "current degree of monetary accommodation" to aid growth.
Philippine policy settings have been steady since the September 2014 rate hike of 25 basis points, as inflation has stayed manageable despite continuing robust Philippine growth.
In April-June, the economy grew 6.5 percent from a year earlier. Third-quarter growth data is due on Nov. 16.
Gareth Leather, economist at Capital Economics, expects the central bank to leave rates on hold this year and throughout 2018, saying overheating fears were "exaggerated".
"Many of the current overheating fears have centered on the rapid pace of credit growth and the disappearance of the current account surplus. Both are mainly the result of the boom in investment, rather than an unsustainable consumer boom," he said in a note.