Wednesday, June 20, 2018
Close  
  • share this

BSP cuts SDA yield, retains key policy rates

Monetary officials still see no immediate inflation threat

The Bangko Sentral ng Pilipinas on Thursday slashed the interest rate on special deposit accounts to help curb the appreciation of the peso.

At the same time, the BSP kept its key policy rates steady at 3.5 percent for overnight borrowing and 5.5 percent for overnight lending.

Although regulators reduced the SDA interest rate by 50 basis points—down to 2.5 percent from the previous 3 percent—they still believe that the rate of rise in consumer prices will remain modest over the short term.

ADVERTISEMENT

The SDA rate was last reduced on Jan. 24. Prior to that, the rates hovered above 3.5 percent with varying margins depending on maturity.

The lower SDA rate is seen to make the deposit facility less attractive and, in turn, help stem the inflow of foreign portfolio investments. This will temper the peso’s appreciation.

BSP Governor Amando Tetangco Jr. said the cut in the SDA rate was meant to align existing policies of the BSP with international best practices. In many advanced economies, central banks’ interest rates on deposit accounts are lower than overnight borrowing rates.

“The reduction in the SDA rate is consistent with the BSP’s continuing efforts to fine-tune … its monetary policy tools,” Tetangco said.

The lower SDA yield is expected to encourage banks to withdraw some of their funds parked in the BSP, thereby increasing money circulating in the economy. But Tetangco said the additional money in the country’s financial system would not heighten inflation risks.

“The benign inflation outlook and improving growth prospects provide room for the reduction in the SDA rate,” he said.

ADVERTISEMENT
Don't miss out on the latest news and information.
View comments

Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.

TAGS: Bangko Sentral ng Pilipinas, Interest Rates, Philippines, policy rates, special deposit accounts
For feedback, complaints, or inquiries, contact us.
newsinfo

Police nab 402 suspected criminals in Quezon

June 20, 2018 11:38 AM

newsinfo

2 drug pushers busted in Quezon hotel

June 20, 2018 11:30 AM

entertainment

Anne Curtis thriller to open locally on Aug. 1

June 20, 2018 11:22 AM



© Copyright 1997-2018 INQUIRER.net | All Rights Reserved

We use cookies to ensure you get the best experience on our website. By continuing, you are agreeing to our use of cookies. To find out more, please click this link.