Philippines' BSP likely to be on hold through 2016

As predicted by consensus, Bangko Sentral ng Pilipinas(BSP) was on hold at 4.00%. This is 9th time that BSP took the same decision, also leaving its SDA rates at 2.5% and RRR steady.

There is low inflation and sluggish growth in the country, still the central bank seems comfortable with its policy. The bank says that poor weather and global backdrop are largely risky for growth and infaltion.

BSP acknowledged downside risks to inflation from a soft global growth backdrop, but also noted that risks to inflation are broadly balanced. Following the meeting, Governor Tetangco noted that the benign inflation environment gave room to BSP to keep rates on hold. 

BSP revised its CPI forecast for 2015 down to 1.4%, from a prior expectation of 1.6%. It lowered its 2016 inflation forecast to 2.3%. BSP's 2017 inflation forecast is at 2.9%.

"Bangko Sentral has remained on the sidelines throughout 2015 and is likely to remain so in 2016 as well. We continue to expect the next policy move to be a hike, but with 2016 growth now likely to be slower than we previously forecast, we delay our forecast timing of the first hike to Q2 17 (from Q3 16)", says Barclays in a research note. 

The bank might likely go for a rate hiking decision when it finds that the country's growth recovered to the mark, and when it also finds the inflation high enough to justify a rate hike.