Slower global growth gives BSP more room for key rates adjustment

Bangko Sentral ng Pilipinas (Central Bank of the Philippines). Wikipedia photo

MANILA — A slower global growth may mean more policy settings’ adjustment space for the Bangko Sentral ng Pilipinas.

BSP Governor Amando M. Tetangco told reporters that the foreseen slowdown in global growth may “help keep global inflation in check” as well as  it could “lead to a more sustainable growth in the medium to long term.”

The country’s inflation rate is above the midpoint of the target range and has averaged 4.2 percent as of June.

The rate is because of the  increasing food prices brought by the destruction caused by typhoons late last year.

Since the first quarter,  BSP has maintained the key rates steady as inflation expectations stayed within the 3.5 percent target.

On its latest World Economic Outlook update, the International Monetary Fund (IMF) has lowered its forecast for 2014’s global economic expansion to 3.4 percent from 3.6 percent.

The projection was downgraded following a weak first quarter and less bullish prospects for several emerging markets for the whole year.

The 2014 Philippine economic growth forecast of 6.5 percent was also lowered to 6.2 percent after a disappointing 5.7 percent expansion during the first quarter.

“This could provide us policy space and room to maneuver as we use this period to strengthen our own domestic sources of growth-agriculture and industry, as well as consumption-and build the necessary infrastructure that will create the base for a more solid economic growth trajectory going forward,” Tetangco said.