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Monetary instruments have limited effect on supply shocks caused by
rising oil and commodity prices, Bangko Sentral ng Pilipinas (BSP)
said a day before the Monetary Board’s policy meeting.
BSP made a statement Wednesday that its monetary
intervention is not an appropriate action to address rising
inflation, which was driven mainly by global oil prices of oil and
commodities, including rice.
“While the use of monetary instruments against
such supply shocks has limited effect compared with supply side
intervention, BSP supports the national government’s efforts to
find ways to cushion the country from the adverse effects of these
price spikes,” BSP said.
Instead, BSP announced its support to
administrative order (AO) 225 issued by President Gloria Arroyo in
mandating government agencies to allocate 5 percent of its surplus
to projects that will put in place low-cost consumer and medicine
outlets, improve PhilHealth and microfinance services in accordance
with relevant laws, charters and by-laws.
The AO covers government-owned and -controlled
corporations, government financial institutions, including the
Philippine Gaming Corp., the Philippine Charity Sweepstakes Office,
the Social Security System, the Government Service Insurance System,
the National Power Corp. and the Philippine National Oil Company.
The National Statistical and Coordination Board
will announce today the actual inflation for May.
From 8.3 percent in April, BSP projected
inflation to reach up to 9.7 percent.
Meanwhile, the peso depreciated to P43.960
against a US dollar on Wednesday from P43.750 on Tuesday due to
market’s concern over possible increase of BSP’s key policy
rates in today’s policy meeting.
Traders said a strong selling interest has kept
the dollar from breaking through the P44.00 barrier. As the
remittance season ends, traders expect peso weakness ahead as the
import season gets on the way.
At the Philippine Dealing System, the peso
traded to a high of P43.960 and low of P43.770 while the total
volume turnover reached $688.580 million.
The market expects BSP to tighten monetary
policy by at least a quarter of a percentage point to curb runaway
inflation. However, some analyst said that some were expecting BSP
to maintain rates today.
The last time the BSP raised policy rates was in
October 2005.
BSP’s overnight borrowing rate stood at 5
percent while overnight lending at 5.75 percent.
BSP Governor Amando Tetangco has said that the
economic slowdown would dampen inflation.
He said the central bank would act decisively if
it perceived the 2009 inflation target of 2.5 percent to 4.5 percent
to be at risk.
-- Maricel E. Burgonio
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