BSP maintains key rates at record lows

The Bangko Sentral ng Pilipinas (BSP) on Thursday kept interest rates on hold as consumer price pressures remained benign, allowing officials to sustain support for the Philippine economy.

During their meeting, members of the BSP’s Monetary Board (MB) kept the benchmark overnight borrowing and lending rates at record lows of 3.5 and 5.5 percent.

Policy rates have stood at these levels since October last year.

Interest rates on special deposit accounts and reserve requirements for banks were also unchanged.

“The MB noted that, while global economic conditions remain challenging, prospects for domestic activity remain robust, supported by buoyant domestic demand and favorable consumer and business sentiment,” BSP Governor Amando M. Tetangco Jr. said.

The forecast for 2013 average consumer price inflation, which measures the movement in prices of key commodities, was also kept at 3 percent, which is at the low end of the BSP’s official target range of 3-5 percent.

Consumer price inflation averaged at 2.8 percent in the first nine months.

BSP Deputy Governor Diwa C. Guinigundo said that the commodities tracked by the government to compute inflation had increased by under 3 percent.

The low inflation in the nine months to September came despite record-high rates in the country’s money supply.

Domestic liquidity grew by 30.1 and 30.4 percent in July and August, respectively—rates of growth not seen in the last decade.

Tetangco said the growing economy had been able to successfully absorb this additional cash which, instead of fueling consumption, has been diverted to productive sectors.