Statement by the Bankgo Sentral NG Pilipinas:
The Monetary Board’s decision is based on its assessment of a benign inflation environment. Latest baseline forecasts indicate that the future inflation path continues to be broadly in line with the target range of 4.0±1.0 percent in 2013-2014 and 3.0±1.0 percent for 2015, while inflation expectations remain firmly anchored. Domestic economic activity has also been growing at a solid pace, supported by firm demand and buoyant business sentiment. Steady policy settings will also allow policymakers to better assess evolving economic risks, given the current volatilities in global financial markets.
At the same time, the Monetary Board noted that the balance of risks to the inflation outlook has shifted slightly toward the upside as oil prices have become more volatile amid ongoing geopolitical tensions in the Middle East. Meanwhile, world economic prospects are seen to stay broadly subdued, thus tempering pressures on global commodity prices. The robust growth of lending to the productive sectors of the economy should also support the improvement in the economy’s absorptive capacity and help moderate price pressures. As expected, the BSP’s operational adjustment of its SDA facility has also contributed to the rise in domestic liquidity (M3) growth in July. As M3 growth rates are expected to decline once these adjustments have been completed, a temporary period of strong M3 growth is not expected to lead to significant inflationary pressures.
Going forward, the BSP will continue to pay close attention to the outlook for prices and economic activity to ensure that monetary policy continues to safeguard non-inflationary economic growth.