BSP rates likely to remain unchanged

The Bangko Sentral ng Pilipinas will most likely maintain its policy rates at historic low levels throughout the year to help keep the economy growing despite unfavorable developments offshore.

This is according to Moody’s Analytics, which said existing policy rates of the BSP were so far “just enough” to help fuel domestic economic activities.

The policy rates, which influence commercial interest rates, stand at 4 percent for overnight borrowing and 6 percent for overnight lending.

“Policy rates in the Philippines are appropriate at the moment,” said Katrina Ell, associate economist at Moody’s Analytics, a think tank and research arm of Moody’s Corp.

“We expect most central banks across Asia to keep rates steady with the expectation that global demand will gather steam in the second half of the year,” Ell added.

The BSP has so far cut the rates twice this year, first in January and second in March, by a total of 50 basis points. The move, which brought the rates back to record lows, was aimed at boosting growth of the Philippine economy amid the dampening effects of the eurozone crisis.

BSP officials said the low interest rates should help spur demand for loans, thus increase domestic consumption and investments.

The government aims for a 5- to 6-percent economic growth for this year, faster than last year’s 3.7 percent, even as the debt woes in key export markets in the West remain unresolved.

Moody’s Analytics said the baseline scenario is that the eurozone crisis will persist, but will not be more serious than it is now.

Nonetheless, it said there was a less likely scenario that the turmoil in the eurozone will worsen. This may happen if Greece abandons the austerity measures it agreed to implement to get another round of bailout funds, and defaults on its maturing debts.

In this scenario, Moody’s Analytics said the BSP and the central banks of other emerging Asian economies may further cut their key policy rates.—

Michelle V. Remo