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MANILA - (UPDATED 5:34 p.m.) The Bangko Sentral ng Pilipinas on Thursday kept its key interest rates steady given benign inflation, but increased its inflation forecast through next year.
During a meeting of its policy-making Monetary Board, the BSP maintained its overnight borrowing or reverse repurchase rate at 3.75 percent and its overnight lending or repurchase rate at 5.75 percent.
While price increases remain moderate, the BSP increased it forecast for inflation this year to 3.4 percent from the earlier estimate of 3.1 percent. For next year, the forecast was raised to 4.1 percent from the previous 3.2 percent.
Despite the increase, the new figures are still within the BSP target range of 3-5 percent.
“While inflation forecasts have risen slightly due to the higher August inflation and recent increases in global oil and other commodity prices, the future inflation path remains well within the target,” said BSP Governor Amando M. Tetangco Jr.
The BSP decision to hold onto its policy rates comes ahead of a meeting by the US Federal Reserve, which is widely believed to undertake a fresh round of bond-buying - the so-called "quantitative easing" - to release more liquidity into the US financial system and encourage higher borrowing to prop up the world's biggest economy.
The Fed meeting also comes on the heels of the German Constitutional Court's decision to clear a fresh bailout fund for troubled economies in the euro zone area.
“Weak global economic prospects continue to temper the inflation outlook, as a possible easing in global demand could contribute to moderate international commodity prices. The sustained stability of the peso against the US dollar could temper inflationary pressures in the future,” Tetangco said.
Deputy Governor Diwa C. Guinigundo said the inflation outlook remain within target through 2013 despite the uptick last month on account of the supply disruption caused by massive flooding in Metro Manila and Luzon.
Inflation climbed to a seven-month high of 3.8 percent in August, but the year-to-date average remains at the low end of the BSP target range for the year.
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