Interest rates seen to stay low up to ’15By Michelle V. Remo
Philippine Daily Inquirer
The environment of moderate inflation and low interest rates the Philippines currently enjoys may extended for two to three more years, the Bangko Sentral ng Pilipinas said.
BSP Governor Amando Tetangco Jr. on Monday told reporters that latest estimates by monetary authorities showed that inflation may settle between 3 and 4 percent in 2014 to 2015.
For this and next year, the central bank expects inflation to settle within the 3- to 5-percent range. As of the first half of this year, inflation averaged at 3 percent, keeping the full-year targeted ceiling attainable.
“Given what is happening in the global economy and to commodity prices, and considering macroeconomic management [in the Philippines], we do not expect a pickup in the inflation rate,” Tetangco said.
He said that should inflation rate indeed remain benign, the BSP would have the flexibility to keep interest rates low.
Currently, the central bank’s key policy rates, which influence commercial bank lending rates, stand at historic lows of 3.75 and 5.75 percent, respectively.
Because of the still lackluster growth of the United States and the prolonged debt crisis in the eurozone, demand for goods and services from these economies remains weak. As such, prices of commodities traded globally are rising only moderately, if not contracting. Oil prices, for instance, have remained soft this year.
Given declining prices of oil imports and the moderate increase in prices of other imported goods, increase in the overall consumer prices in the Philippines is expected to stay modest, Tetangco said. This trend is expected to continue over the next two to three years partly because global economic problems are not expected to be solved soon.
The BSP chief said significant liquidity within the Philippine economy is also expected to help keep inflation benign over the next few years.
On one hand, he said, the Philippine banking system continues to enjoy growing profits and resources. As such, they are likely to keep extending more loans to businesses, thereby fueling growth in supply of goods and services.
On the other, Tetangco added, low interest rates will encourage firms to secure bank loans to finance their investment plans.
Tetangco also said the BSP is prepared to adjust monetary policy as necessary to ensure inflation in the country remains manageable even as the economy continues to grow.
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