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By Maricel E. Burgonio, Reporter
THE interest rate that banks earn
on their deposits with the Bangko Sentral ng Pilipinas will have to
remain at its current level after the Monetary Board decided to put
off any adjustment to its overnight borrowing rate.
Consequently, its overnight
borrowing rate remains at 7.5 percent, while its overnight lending
rate stands at 9.75 percent.
In a meeting on Thursday, the
BSP’s policymaking body said it is keeping its overnight rates
steady, as it has yet to determine the impact of an earlier tiering
scheme that effectively cuts the rate that banks earn on deposits
exceeding P5 billion.
“[O]n balance, there continue
to be sufficient grounds for caution in the monetary stance. More
time is needed to allow the impact of the tiering system to fully
wind its way through the credit channel,” the BSP said in a
statement, adding, “A prudent pause is only appropriate
particularly in light of the continued strong growth in liquidity
and the downtrend in interest rates.”
Indeed, benchmark interest rates
have fallen to record lows on the back of the government’s
improving finances. BSP Deputy Governor Nestor A. Espenilla Jr. said
the impact of the tiering scheme will be felt starting February.
Although it believes that
consumer price increases would ease toward the low-end of the
official target of 4 percent to 5 percent this year, the central
bank said several risks to inflation remain, including geopolitical
disruptions that may fuel another rise in oil prices, a stronger dry
spell that may push up food prices, a legislative proposal to raise
the minimum wage, and government plans to crank up public spending
this year.
“The Monetary Board remains
firmly committed to addressing the risks to future inflation and
will continue to monitor closely the evolving conditions for
consumer prices, aggregate demand, domestic liquidity and other
factors in order to determine the appropriate stance of monetary
policy,” the BSP said.
The central bank has been under
pressure to cut its key rates in light of the failure of bank
lending to pick up. Commercial bank lending rose 11.1 percent in
October, only to pull back to 6.8 percent a month later.
However, the BSP is also cautious
about higher dollar inflows, which have boosted domestic liquidity,
leading to a possible surge in inflation.
“We’re concerned about
liquidity if something beyond [a] certain level,” BSP Deputy
Governor Diwa C. Guinigundo said.
Liquidity accelerated to 18.5
percent year on year in November from 16.1 percent the month before.
Inflation last year averaged 6.2 percent, lower than the 7.6 percent
in 2005, but higher than the BSP’s target of between 4 percent and
5 percent.
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