Philippines trims key interest rates again

MANILA, Philippines—The Philippine central bank trimmed its key interest rates by a
further 25 basis points Thursday, saying the domestic economy needs a further boost to
override weak global demand.

The fourth rate cut this year brought the cumulative reduction over the period to one
percentage point, said bank governor Amando Tetangco.

“World economic conditions are likely to remain tepid as fiscal and financial-sector
stresses in advanced economies continue to dampen market confidence,” he said.

“The domestic underpinnings of Philippine economic growth remain firm. However,
additional policy support could help ward off risks associated with weaker external
demand by encouraging investment and consumption.”

While impending electricity rate increases and rising global prices for some grains could
upset the inflation outlook, subdued global demand should temper the overall picture by
easing price pressures on oil imports, he added.

The latest central bank action brought its overnight borrowing rate to 3.50 percent, and its
overnight lending rate to 5.50 percent.

Rate cuts of 25 basis points each were put into effect in January, March and July.

Last month the central bank raised its inflation forecasts to 3.4 percent this year and 4.1
percent in 2013, from 3.1 and 3.2 percent, respectively.

Inflation rose 3.6 percent year on year last month, bringing the average for the first eight
months to 3.2 percent.

The government expects the economy to grow by nearly six percent this year after a
6.1 percent expansion in the first six months, Economic Planning Secretary Arsenio
Balisacan said last month.

However, exports are up by only 5.4 percent in the first eight months of 2012 amid a
slump in August in shipments of electronics, the country’s main export, to the United
States, China and other key markets.

August imports also slipped 0.4 percent overall, to $5.06 billion, Economic Planning
Undersecretary Rolando Tungpalan said Thursday.

“It is therefore important to continue to stimulate the domestic sources of growth and
promote trade with other countries,” he said in a statement.