World Bank says PH monetary policy stance appropriate for now
The World Bank said the Philippines’ monetary policy stance is appropriate for now even as inflation is set to breach the central bank’s target this year.
“Keeping the interest rate flat for now is presently the most appropriate response,” Birgit Hansl, a World Bank economist in Manila, said in an emailed response to questions last week. “If inflationary pressures build rapidly and, most of all, if they persist over a few months, a rate adjustment would be appropriate – also given that there is ample domestic liquidity.”
Governor Nestor Espenilla has taken a cautious approach to monetary policy tightening, keeping the benchmark interest rate unchanged at 3 percent earlier this month even as he forecast inflation will exceed the 4 percent upper limit of the inflation target this year. Most economists in a Bloomberg survey forecast the central bank will start raising its key rate next month.
Bangko Sentral ng Pilipinas is waiting for signs that price pressures are becoming more entrenched before raising rates, the governor said this month.
Click to read: Philippines Holds Rate With 2018 Inflation Seen Breaching Target
“BSP is aware it must adjust its policy setting soon to avoid falling behind the curve,” said Emilio Neri, an economist at Bank of the Philippine Islands in Manila. “Markets could become less orderly if inflation in the coming months surprises on the upside and compels BSP to hike more aggressively.”
Weak Peso The peso, which dropped to its lowest level since 2006 last week, has lost about 4 percent against the dollar this year, the worst performer after the Argentine peso