Philippine Central Bank Keeps Policy Rates Unchanged

The Philippines' central bank on Thursday retained key policy rates unchanged as expected, saying the pause will allow policymakers to gauge the upside and downside risks to inflation outlook.

The reverse repurchase or overnight borrowing rate was kept unchanged at 4 percent, while the overnight lending or repurchase facility was retained at 6 percent. This followed a reduction of 25 basis points each in January and March.

At today's meeting, the monetary board of the Bangko Sentral ng Pilipinas also left the reserve requirement ratios steady. Announcing the decision, the central bank said "the uncertainty in the factors affecting the outlook for inflation suggests a need for a pause in monetary policy adjustment."

According to the bank, a prudent pause will allow policymakers to better assess how the upside and downside risks to inflation will play out. This will also facilitate this year's cumulative 50-basis-point reduction to continue to work its way through the economy.

At the same time, the monetary board noted that the balance of risks to the inflation outlook now leans slightly toward the upside due to elevated oil prices.

Potential pass-through from higher energy prices as well as the impact of sustained foreign exchange inflows also constitute other sources of upside risks inflation outlook. On the other hand, weak global economy and the stable peso could have a moderating effect on inflation.

The monetary board said inflation will likely settle near the lower half of the 3-5 percent target range in 2012 and 2013.

According to the board, prospects for overall domestic economic activity are gradually strengthening despite fragile global economic conditions.

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