BSP seen keeping policy rates till Dec.

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The Bangko Sental ng Pilipinas (BSP) is seen to keep its key policy rates unchanged until the end of the year, an international banking group said.

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“In line with our favorable economic outlook, we expect BSP to keep policy rates steady at 3.5 percent for the rest of 2013,” Standard Chartered Bank said in a recent research note.

Since October last year, the Monetary Board (MB) of the BSP has kept interest rates for the overnight borrowing or reverse repurchase (RRP) facility at 3.5 percent, while overnight lending or repurchase is also unchanged at 5.5 percent.

Meanwhile, the interest rates on the special deposit account (SDA) facility were left unchanged at 2 percent. Since January, BSP slashed the interest rates for SDAs by a total of 150 basis points.

The BSP also said that the inflation environment in the country continue to be benign. It trimmed down its inflation forecast for this year to 3 percent from its previous projection of 3.3 percent.

For the first half of 2014, Standard Chartered said that the BSP may hike its key policy rates by a total of 50 basis points to 4 percent.

The banks cited reasons such as the rising inflation and the future of the $85 billion a month quantitative easing program of the United States Federal Reserve.

“Risks to our forecast arise from the pace of the pick-up in inflation and the Fed’s tapering timeline,” it stated.

SDA rate, on the other hand was seen to rising in tandem with the policy rate, from 2 percent currently to 2.5 percent in the first half of 2014, “unless capital flows become more volatile again in the near term.”

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