The Bangko Sentral ng Pilipinas on Thursday kept key interest rates unchanged from their historic low levels, believing no adjustment is needed at the moment given the high economic growth and low inflation that the country now enjoys.
The BSP’s key policy rates, which influence commercial interest rates, still stand at record lows of 3.5 percent and 5.5 percent for overnight borrowing and lending, respectively.
“The Monetary Board is of the view that the manageable inflation outlook and robust domestic growth support keeping policy rates steady,” BSP Governor Amando Tetangco Jr. said in a briefing immediately after the board’s meeting.
A report saying that the economy, measured in terms of gross domestic product, grew by a surprising 7.1 percent in the third quarter from a year ago convinced the Monetary Board to keep the rates steady.
The Philippines’ growth rate during the period was the fastest recorded in Southeast Asia.
This brought average growth for the first three quarters of the year to 6.5 percent, allowing the country a greater chance to exceed the official full-year growth target of 5 to 6 percent.
The government also reported earlier that inflation averaged at only 3.2 percent in the first 11 months of the year, staying well within the full-year target of 3 to 5 percent.
The BSP’s monetary policy had been brought down to record lows this year following a series of rate cuts in January, March, July and October—each by 25 basis points.
The four previous rate cuts were meant to help boost domestic demand and offset the impact of anemic export earnings on the economy’s growth performance.
Export revenues have been volatile this year given the crisis in most export markets, led by the eurozone. The BSP said low interest rates can help boost demand for bank loans, which in turn should fuel more consumption and investments.
BSP Deputy Governor Diwa Guinigundo said the previous rate reductions proved to be effective in helping boost growth of the economy.
Moreover, the outlook that the economy will continue to grow robustly, while inflation will remain benign over the short to medium term, indicated that the current interest-rate environment is appropriate.