Central bank maintains key policy rates

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The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) on Thursday announced that it decided to maintain the current key policy rates.

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In a press briefing on Thursday, BSP Governor Amando Tetangco Jr. said that interest rates for the overnight borrowing or reverse repurchase (RRP) facility is at 3.5 percent, while overnight lending or repurchase is at 5.5 percent. The reserve requirement ratios were held steady as well.

The interest rate on the special deposit account (SDA) facility was also maintained at 2 percent.

Since January, BSP slashed the interest rates for SDAs by a total of 150 basis points.

Tetangco said that the Monetary Board’s decision is based on its assessment that the inflation environment continues to be benign.

“The forecasts are supported by well-contained inflation expectations, which remain within the target over the policy horizon,” he said.

Moreover, Tetangco said that economic growth continues to be robust, as it was continuously supported by domestic demand and buoyant market confidence.

He attributed the solid growth to the continued strong domestic liquidity and bank lending.

Domestic liquidity in May grew by 16.3 percent year-on-year to reach P5.3 trillion, while the total outstanding loans of commercial banks, net of banks’ RRP placements continued to expand at 12 percent.

Tetangco added that market volatility was also considered in maintaining the policy stance.

“The Monetary Board also considered that financial market volatility persists owing to concerns a over the timing of the tapering of monetary stimulus in advanced economies,” he said.

The BSP governor added that the board is of the view that the current policy settings remain appropriate.

“The manageable inflation outlook and sting domestic growth support keeping policy settings steady given renewed market volatility,” he said.

Inflation outlook
Meanwhile, the Monetary Board raised its inflation outlook this year and for the next two years.

Inflation for 2013 is seen to settle at 3.3 percent from an earlier projection of 3.1 percent, while for 2014 and 2015, inflation is likely to settle 4 percent and 3.5 percent, respectively.

On the other hand, the BSP is also seeing a higher inflation rate this month.

In a text message also on Thursday, BSP Governor Amando Tetangco Jr. said that the July inflation rate was projected to be within 2.2 percent to 3.1 percent.

“Increases in prices of petroleum and selected food items and the weaker peso could have been offset by reduced utility rates,” he said.

Tetangco added that the central bank still sees inflation falling within the 3-percent to 5-percent target for 2013 and 2014, and the 2-percent to 4-percent range for 2015.

He said that risks to inflation outlook remains broadly balanced as “global economic prospects are likely to stay subdued going forward, thus tempering upward pressures on commodity prices.”

“Moving forward, the BSP will continue to assess its monetary policy stance in fulfillment of its primary mandate of delivering price stability conducive to a balanced and sustainable economic growth,” he said.

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