BSP cuts interest rates

MANILA, Philippines—The Bangko Sentral ng Pilipinas on Thursday cut interest rates in an effort to cushion the nation’s economy from an expected global slowdown this year.

Key policy interest rates were lowered by 25 basis points, bringing the overnight borrowing rate to 4.25 percent and the overnight lending rate to 6.25 percent, the Philippine central bank announced after a meeting of its monetary board.

BSP governor Amando Tetangco warned in a statement that global economic activity was heading towards a slowdown and the country would face “external headwinds in 2012”.

Tetangco said the US economy remained vulnerable while the eurozone was “notably weaker,” hurting global confidence.

“Given these considerations, the monetary board has concluded that the benign inflation outlook allowed some scope for reduction in policy rates to help boost economic activity and support market confidence,” he said.

He said the board assessed that domestic inflation this year would fall within the lower half of the government’s target range of between three and five percent.

The government announced earlier this month that inflation in December dropped to 4.2 percent, from 4.8 percent in November.

This brought inflation for last year to 4.8 percent.

The Philippine central bank had kept interest rates steady for the second half of last year, as it kept a close eye on inflation, after consecutive hikes in March and May.