The Philippine central bank left its benchmark interest rate unchanged at a record low, with economists forecasting it will start tightening policy in 2018 to curb inflation risk.
Bangko Sentral ng Pilipinas held the overnight reverse repurchase rate at 3%, it said in a statement on Thursday, as forecast by 17 of 19 economists in a Bloomberg survey. Two predicted an increase to 3.25%. The bank projected annual inflation will remain within the 2% to 4% target until 2019.
A booming economy and a currency that’s the weakest in Asia this year are fuelling speculation among economists that the Philippines will follow South Korea in tightening monetary policy as early as the first quarter of 2018. Policy makers in the region are wary of possible capital outflows as the Federal Reserve proceeds with rate increases and trims its balance sheet.
Economists are watching for signs of an overheating economy, with the Philippines set to post its first current-account deficit in 15 years, while bank loans are growing close to 20%. Rising oil prices and the approval in Congress on Wednesday of a tax bill that raises levies on oil and coal are also set to boost inflation pressure.
Policy makers maintain that the economy is far from overheating and they can use targeted tools to counter risks. Consumer prices climbed 3.3% in November from a year ago, down from 3.5% in October, while the economy is headed for a sixth year of growth above 6%, among the world’s fastest.