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BSP signals steady policy before meet




Posted on March 17, 2015


WHILE the number of central banks in the region that have eased monetary policy continues to expand, the Bangko Sentral ng Pilipinas (BSP) will likely stand its ground at next week’s rate review as domestic inflation remains manageable and economic activity is still robust, its head said last weekend.

Financial regulators across Asia are racing to cut interest rates to keep deflation at bay and prod economic growth, with the Bank of Thailand and the Bank of Korea being the latest to slash borrowing costs just last week.

Asked if there is growing pressure for BSP to follow suit, Governor Amando M. Tetangco, Jr. told reporters in an e-mail: “Our most recent assessment of the policy stance suggests that current policy settings remain appropriate.”

“Adjustments in BSP’s monetary policy settings still hinge largely on the confluence of domestic demand and supply factors... Domestic demand remains robust, supported by ample liquidity.”

Mr. Tetangco added that the increase in prices of widely used goods is still expected to settle within a 2-4% target range this year and next, with risks to that outlook deemed “broadly balanced.”

“Inflation expectations are also well-anchored,” he added.

Inflation averaged 2.4% as of February after picking up to 2.5% that month from January’s 2.4%.

Mr. Tetangco also noted that global markets remain “very uncertain and volatile” and the path of oil prices -- which have recovered slightly after being more than halved between June last year and January -- remains “uncertain.”

Monetary authorities are scheduled to meet for the second policy meeting this year on March 26. Last Feb. 12, the BSP kept monetary policy steady for the third time in a row as inflation expectations remained firmly anchored and prospects for increased domestic activity continued to be strong. Overnight borrowing and lending rates were kept at 4.0% and 6.0%, respectively; special deposit account rates were also maintained at 2.50%, while the reserve requirement ratios for banks were left unchanged as well.

Mr. Tetangco said a “prolonged period of low interest rates and liquidity-enhancement measures in advanced economies” in the region could bring about “financial market uncertainty and capital flow volatility” in the near term.

“[T]he recent decline in interest rates in Asia could push investors to continue to search for yield,” the central bank chief noted.

“We continue to monitor global developments and how these might potentially affect the domestic economy, including in terms of overall liquidity,” he said.

“Future decisions on monetary policy stance will continue to be data-dependent, in line with BSP’s objectives of ensuring price and financial stability while supporting sustainable economic growth.” -- Daryll Edisonn D. Saclag