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Philippine Central Bank Holds Key Rate Steady Again After November Hike

The Philippine central bank held its key interest rate unchanged on Thursday for a second straight session after hiking it in November.

The Monetary Board, led by Governor Nestor Espenilla Jr., kept the overnight reverse repurchase rate steady at 4.75 percent, the Bangko Sentral Ng Pilipinas said. The decision was in line with economists' expectations.

In November, the bank had raised its benchmark interest rate by 25 basis points to 4.75 percent.

The Monetary Board's latest decision is based on its assessment of a more manageable inflation environment, the bank said.

Weaker oil prices and a normalization of supply conditions for key food items are expected to allow inflation to settle within the target band of 3.0 percent ± 1.0 percentage point for 2019-2020.

Further, price growth expectations have declined further and are now aligned to the inflation target for 2019-2020.

A recovery in household spending and the sustained implementation of the government's infrastructure program have kept domestic demand conditions firm.

"The risks to the inflation outlook are seen to remain evenly balanced for 2019 while leaning toward the downside for 2020 given a more uncertain global economic environment, which in turn could temper potential upward pressures from commodity prices in the coming months," the bank said.

Policymakers deemed the prevailing monetary policy settings to be appropriate, as previous monetary responses continue to work their way through the economy.

They also stressed vigilance against developments that could affect the outlook for inflation.

"Now that the inflation threat appears safely in their rear view mirror we can see the central bank easing off the brake pedal ever so slightly by cutting rates in May after reducing RRR in 1Q," ING Economics economist Nicholas Mapa said.

"With growth expected to teeter close to the edge of 6 percent given the recent budget delay and with the inflation objective safeguarded, BSP may finally opt to give the economy an added boost to regain flagging growth momentum."

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