Bangko Sentral ng Pilipinas maintains rates

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) decided yesterday to keep its overnight borrowing rate at a record low for the third straight month to help support domestic demand including government’s reconstruction efforts.

BSP Governor Amando M. Tetangco Jr. said that the Monetary Board decided to keep the BSP’s key policy rates steady at four percent for the overnight borrowing rate and six percent for the overnight lending rate.

 “In its assessment of the monetary policy stance, the MB considers the current settings as appropriate,” Tetangco said. 

However, the BSP decided to slightly increase its inflation forecasts for this year and next year due to upside risks. 

It raised its inflation forecast to 3.28 percent instead of 3.03 percent this year and to 4.02 percent instead of 3.43 percent next year. It sees inflation coming in at 3.4 percent in 2011.

 “The latest inflation forecasts reflected a slightly higher path, but remained on the lower bound of the targets over the policy horizon,” Tetangco added.

He pointed out that demand pressures on consumer prices continue to be limited and inflation expectations are well anchored while price pressures from crop losses due to tropical Ondoy and typhoon Pepeng are not expected to have a significant lasting impact on inflation.

“With such flexibility, the board also believes that keeping the policy rates steady will help support domestic demand, including reconstruction efforts of the government, and economic activity in the near term,” Tetangco said.

The central bank also decided to keep the interest rates on term reverse repurchase facility and repurchase facility as well as special deposit accounts (SDAs) unchanged.

BSP Deputy Governor Diwa Guinigundo explained that the revised inflation forecasts for this year and next year are well within the inflation targets set by the central bank.

The central bank’s inflation target is pegged between 2.5 percent and 4.5 percent this year as well as between 3.5 percent and 5.5 percent next year.