BSP seen keeping policy rates unchangedBy Paolo G. Montecillo
Philippine Daily Inquirer
KUALA LUMPUR, Malaysia—Market players can expect the Bangko Sentral ng Pilipinas (BSP) to keep policy rates on hold during its meeting today amid stable consumer prices and healthy economic growth that gives space for further monetary pump-priming.
BSP governor Amando M. Tetangco Jr. Wednesday said there was no urgent need to raise interest rates, despite volatility in financial markets that had prompted neighbor Indonesia to tighten its policy stance.
“At this point in time, subject to the discussions tomorrow, there seems to be no urgency to modify or alter the stance of monetary policy,” Tetangco said.
The policy-making Monetary Board will decide today whether to adjust its key interest rates or implement other measures in line with its goal of keeping inflation low and promoting economic growth.
Tetangco’s statements are in line with expectation of most market players. British banking giant HSBC earlier this week said the BSP would likely keep rates on hold, adding that the central bank was in a “sweet spot” that gave it plenty of space to encourage economic activity by keeping borrowing costs low.
This contrasts with Indonesia’s central bank, which hiked interest rates for the third time in four months last August in an effort to defend its depreciating currency as investors pulled out of emerging markets.
The BSP’s overnight borrowing and lending rates currently stand at record lows of 3.5 and 5.5 percent, respectively. Yields on its liquidity-tightening Special Deposit Accounts (SDA) facility are also at a low of 2 percent across all maturities.
Tetangco, speaking at the sidelines of the Alliance for Financial Inclusion (AFI) Global Policy Forum in Kuala Lumpur, said inflation in the Philippines remained at safe levels despite the country’s high growth rate.
The Philippine economy expanded by 7.5 percent in the second quarter of the year, putting it at par with China, Asia’s main growth engine.
Despite this, consumer prices have remained stable. Inflation in August slumped to 2.1 percent from 2.5 percent in July. This brought the year-to-date average as of August to 2.8 percent, which is below the central bank’s target range of 3 to 5 percent.
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