BSP looks for strong growth in 2015

Bangko Sentral ng Pilipinas kept its policy rate unchanged at 4.00%. This was in line with market consensus and the fourth straight on-hold decision. It also left SDA rates at 2.50%. 

In remarks following the decision, BSP Deputy Governor Diwa Guinigundo reiterated that domestic demand was "resilient" and that the economy "doesn't need additional stimulus". The central bank expects growth of 7-8% in 2015, with Mr Guinigundo stating that growth would see support from higher public spending - a key driver of the Q4 acceleration. BSP made a marginal adjustment to its 2015 inflation forecast, lowering it 10bp, to 2.2% (previously: 2.3%). 

"The Philippines should be a significant beneficiary of lower oil prices, and we expect growth of 6.5%, up from 6.1% in 2014, while remittances and exports were weak in January, said Barclays in a report on Thursday.

The broad easing in inflationary pressures and the fall in money supply growth give BSP room to keep interest rates on hold for the time being, but sticky core inflation and strong domestic demand make it unlikely that it will join other central banks in the region in easing policy. 

"We continue to forecast the next policy move will be a hike, most likely in Q4 15, after the Fed begins tightening", added Barclays.