BSP maintains record-low policy rates

The Bangko Sentral ng Pilipinas (BSP) announced on Thursday that it is maintaining its record-low policy rates.

“The Monetary Board [MB] decided to maintain the BSP’s key policy interest rates at 3.5 percent for the overnight borrowing or reverse repurchase [RRP] facility and 5.5 percent for the overnight lending or repurchase [RP] facility,” said BSP Governor Amando Tetangco Jr.

“The interest rates on term RRPs, RPs and special deposit accounts [SDAs] were also maintained accordingly. The reserve requirement ratios were kept steady as well,” he added.

Tetangco said that the Monetary Board’s decision is based on its assessment that current monetary settings remain appropriate, as the cumulative 100-basis point reduction in policy rates in 2012 continues to work its way through the economy.

The latest baseline forecasts follow a slightly lower path but remained within the lower bound of the target over the policy horizon.

Tetangco also said that the risks to the inflation outlook appear to be evenly balanced around the baseline forecasts, with inflation expectations broadly aligned with the inflation target range. Moreover, global economic activity has stabilized in recent months, although fiscal consolidation and financial market stresses in advanced economies continue to temper overall market sentiment.

Global economic prospects, therefore, are likely to stay subdued, thus mitigating upward pressures on commodity prices.

At the same time, the Monetary Board observed that the domestic economy has gained pace on the back of strong domestic demand and buoyant business sentiment, Tetangco added.

“The growth of real gross domestic product [GDP] was stronger than expected at 7.1 percent in third quarter 2012, driven by private spending and fiscal stimulus. In the months ahead, adequate liquidity and strong bank lending are expected to continue to support domestic economic activity and sustain the economy’s momentum,” he said.

Tetangco said that the Monetary Board is of the view that the manageable inflation outlook and robust domestic growth support keeping policy settings steady.

“Going forward, the BSP will continue to monitor evolving price and output conditions to ensure that the monetary policy stance remains consistent with ensuring stable prices while supporting economic growth,” he said.
Inflation target at 4 percent
However, Tetangco said that the Development Budget Coordination Committee (DBCC) during its meeting on November 28, decided to maintain the current inflation target at 4 percent, at plus or minus 1 percent for 2013 to 2014 and reduce the inflation target for 2015 to 2016 to 3 percent, also at plus or minus 1 percent.

He said, “the most recent assessment of current and prospective trends indicates a favorable outlook over the medium term. The current four plus or minus 1 percent fixed annual target for 2013 to 2014 of the government remains suitable to the Philippine economy. This target is consistent with the country’s sustained economic growth objectives, favorable inflation forecasts and benign inflation expectations.”

The announcement of the target is in line with the BSP’s commitment to greater transparency and accountability in its conduct of monetary policy.


Refer http://www.manilatimes.net/index.php/business/top-business-news/37324-bsp-maintains-record-low-policy-rates

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  • Published on 26 October 2012 [...]

  • By Paolo G. MontecilloPhilippine Daily [...]

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BSP maintains record-low policy rates


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