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BSP exec says policy still appropriate

Posted on September 02, 2013

MONETARY POLICY remains appropriate amid renewed market volatility, a Bangko Sentral ng Pilipinas (BSP) official said, as it has produced a combination of favorable macroeconomic conditions.

“[H]as growth slowed down? No. Is inflation accelerating?” central bank deputy governor Diwa C. Guinigundo said on Friday.

“Do we have a weak banking system? No, our banks are strong and stable. We also don’t see the economy overheating,” he added.

Emerging markets, the Philippines included, have been hit by capital flows in recent days. Local declines, however, were arrested following news that the Philippine economy expanded by a stronger-than-expected 7.5% the second quarter.

Inflation, meanwhile, remains benign, averaging 2.9% as of July and just below the BSP’s 3%-5% target. August data is scheduled to be released this Thursday and the BSP expects the pace to have fallen to the 1.9%-2.7% range.

Monetary authorities, said Mr. Guinigundo, remain watchful and will act promptly to support the economy.

The BSP’s overnight borrowing and lending rates have been kept at 3.5% and 5.5%, respectively, since October 2012. These will be reviewed anew on Sept. 12.