Philippines holds rate in 1st meeting under Diokno

MANILA • The Philippine central bank left its benchmark interest rate unchanged in governor Benjamin Diokno’s first policy meeting, as officials remained cautious even as in ation eases.

Bangko Sentral ng Pilipinas held the overnight reverse repurchase rate at 4.75%, it said in a statement in Manila yesterday, in line with the forecasts of all 21 economists surveyed by Bloomberg. The ratio of deposits large banks are required to hold in reserve was left at 18%.

The central bank said a projected recovery in household spending and the government’s infrastructure programme is supporting the economy. However, there are risks including the budget impasse in Congress, it said.

Inflation forecasts for this year and next were little changed at 3%. The central bank’s target is for inflation to average 2% to 4%.

After breaching the target last year, inflation reached its slowest pace in a year at 3.8% in February and has averaged 4.1% year to date Diokno took office this month and has indicated his willingness to cut rates or reduce the reserve ratio for banks. A former budget minister — and a surprise appointment to the central bank post — he’s seen as pro-growth and tolerant of a weaker currency.

However, he has said in recent weeks that any policy adjustment will be data dependent The peso has lost almost 2% this month, among the worst performers in global emerging markets

Analysts at DBS Group Holdings Ltd and elsewhere have flagged risks of an inflation rebound in the Philippines and a possible negative market reaction if the central bank takes “overly aggressive or premature” easing measures. — Bloomberg