The Philippine central bank left policy rates unchanged on Thursday in a widely expected move, saying inflation posed little threat even as the economy is set to sustain its strong growth momentum. The Bangko Sentral ng Pilipinas (BSP) kept its benchmark interest rate at 3.0 percent. All 10 economists in a Reuters poll expected no change in policy settings this week.
"Even amid external headwinds, the outlook for domestic activity remains intact," central bank governor Amando Tetangco told a news conference. The Southeast Asian economy is among the world's fastest growing with robust consumption and infrastructure spending, which fuelled last year's growth, continuing to bolster economic activity as exports pick up.
The central bank kept its forecasts for average inflation this year at 3.4 percent and for next year at 3.0 percent, but it cited upside risks from the "transitory" effect of the government's proposed tax measures and possible increases in transport and electricity costs. Philippine President Rodrigo Duterte plans to increase infrastructure spending to as much as 7 percent of gross domestic product (GDP) by the end of his six-year term in 2022 from 5.2 percent of GDP this year. To fund the plan, the government has asked Congress to approve a package of tax measures to raise funds, including increasing fuel excise taxes.