BSP keeps interest rates stable

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Metro Manila (CNN Philippines, February 7) — Borrowing rates will stay the same for the next few months.

The Monetary Board, the policy-making arm of the Bangko Sentral ng Pilipinas (BSP) announced Thursday that interest rates will remain at 4.75 percent.

In a statement, the BSP said that this decision was based on its expectation of lower inflation.

"Latest baseline inflation forecasts show inflation settling within the target band of 3.0 percent ± 1.0 percentage point for 2019-2020, as price pressures continue to recede due to the decline in international crude oil prices and the normalization of supply conditions for key food items," the BSP said.

It added that it is likely that the government will achieve its 2-4 percent inflation target for 2019.

It flagged the uncertain global economic environment as a possible risk to this output, as it could lend some upward pressure to domestic commodity prices.

The Philippine Statistics Authority on February 5 announced that inflation in January was at 4.4 percent, lower than the 5.1 percent recorded in December.

The BSP expects the annual inflation rate to slow down to 3.1 percent for the full year of 2019. 

The central bank usually increases interest rates to tame inflation. Higher rates tend to moderate economic growth by increasing the cost of borrowing and limiting consumer spending. Lower rates, on the other, give consumers more money to spend and encourage businesses to borrow money, fuelling increased spending throughout the economy.