BSP keeps rates unchanged as expected

Reuters

Posted at Aug 26 2010 04:35 PM | Updated as of Aug 27 2010 12:38 AM

MANILA, Philippines - The central bank, Bangko Sentral ng Pilipinas (BSP), kept its key policy rates steady following stronger-than-expected gross domestic product data on Thursday.

The BSP has kept the overnight borrowing rate at a record low of 4% for over a year now.

Central bank governor Amando Tetangco said earlier this month there was no compelling reason to change monetary policy, with inflation on track to meet the government's 2010 target.

Inflation pressures, especially from food and oil prices, have been more moderate than expected in recent months, allowing the central bank to twice cut its 2010 and 2011 inflation forecasts. It now expects average inflation to come in at 4% in 2010 and 3% in 2011. Both figures are within the respective government targets of 3.5% to 5.5% and 3% to 5%.

All 13 economists polled by Reuters this week had expected a steady policy rate. Of the 13, five predicted a rise at the central bank's next policy meeting in October, while another five forecast authorities to delay the rate hike to November.

The Philippines, one of the four major economies in Asia that have yet to lift policy rates after the global financial crisis, expects the economy to grow 5% to 6% this year before rising 7% to 8% each year from 2011 to 2016. Japan, China and Indonesia have also yet to raise rates.

The central bank began unwinding crisis-driven liquidity policies in January, raising by 50 basis points to 4% the rate for lending short-term money under a peso rediscounting window. This was followed by two cuts in the budget for the facility, bringing it back to the pre-crisis level of P20 billion ($442 million).

The central bank slashed rates by a total of 200 basis points between December 2008 and July 2009 to soften the blow of the global recession.