BSP says still has leeway, but policy room narrowing

Posted at 02/28/14 11:10 AM

MANILA - The Philippine central bank still has leeway to address emerging risks with inflation staying manageable, although policy space is slowly narrowing, its governor said on Friday.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to continue to inch up due to higher oil and rice prices but the overall outlook remains manageable, Amando Tetangco told reporters on the sidelines of an economic forum.

Tetangco said Philippine annual inflation in February is likely to be within a range of 3.8 to 4.6 percent, taking into account higher fuel and rice prices

It would mark the fastest pace since November 2011 if the actual rate falls in the upper end of that range, but lower electricity costs could offset upside price pressures.

"We will make adjustments to policy settings as needed to ensure that price pressures are contained and inflation expectations over the policy horizon remain well-anchored," Tetangco said.

The annual inflation rate was 4.2 percent in January.

The Philippine central bank left its benchmark interest rate steady on Feb. 6, saying inflation was manageable, but analysts said the chances of a hike were rising due to pressures on food and utility prices and a weak peso.