BSP still has room to adjust rates

MANILA, Philippines - The Bangko Sentral ng Pilipinas still has room to adjust key policy rates as domestic economic activity remains robust, a central bank official said yesterday.

 “The BSP continues to see that there’s a room for preemptive measures or calibrated monetary policy actions because there continues to be buoyant domestic economic activity as we see in various indicators,” Dennis Lapid, deputy director at the BSP’s Department of Economic Research, said in a briefing yesterday.

Monetary authorities earlier this year have raised key policy rates by a total of 50 basis points to ensure inflation remains within target for this year until the next. Moreover, the reserve requirement ratios and the special deposit account rate have been raised to rein in excess liquidity in the markets.

The Monetary Board will revisit policy settings on Oct. 23.

BSP Assistant Governor Ma. Almasara Cyd Tuano-Amador said in the same briefing further actions from the central bank will be contingent on incoming data, especially on inflation expectations.

 “It will continue to be data dependent, not only what’s happening to inflation but also to growth,” Amador said.

 “What we are seeing is growth appears to be in solid ground, it continues to be robust so if the Monetary Board considers any actions, it should not dampen growth,” she said.

Philippine economic growth accelerated to 6.4 percent in the second quarter from a disappointing 5.6 percent in the first quarter. This brought the first half average to six percent, still below the government’s full year target of 6.5 to 7.5 percent.

Inflation, meanwhile, stood at 4.4 percent as of August, above the midpoint of the BSP’s three- to five-percent target this year.

Amador said the pre-emptive policy actions are preferred by the BSP as they are less disruptive to the economy.

 “If you are behind the curve in terms of policy actions, you need to play catch up, and if you play catch up, you need sharper adjustments not only because market thinks you are behind the curve but also because for policy actions to have traction, they will have to be sharper if you respond too late,” Amador explained.