BSP keeps borrowing rates steady

The Bangko Sentral on Thursday kept its overnight borrowing and lending rates unchanged, amid signs of easing inflationary pressures and slowing economic growth.

“The monetary board’s assessment of a manageable inflation environment and subdued economic conditions continues to support current monetary policy settings,” said Bangko Sentral Governor Amando Tetangco Jr.

The monetary board kept the overnight borrowing rate at 4.5 percent and the overnight lending rate at 6.5 percent. It also kept the reserve requirement ratio at 21 percent.

A low cost of loans, dictated by the Bangko Sentral’s policy, helps stimulate bank lending and supports economic growth. Bank loans were growing by about 20 percent year-on-year in recent months.

Tetangco said the Monetary Board believes the decision to maintain the policy stance is consistent with the emerging economic developments and the inflation outlook.

“Latest average baseline forecasts show a lower inflation path, consistent with the 3 to 5 percent target range for 2011 to 2013, while inflation expectations remain well contained, supported by easing commodity prices,” said Tetangco.

Inflation rate hit 4.8 percent in and averaged at the same rate of 4.8 percent in the first nine months of 2011, based on the 2006 consumer price index. Using the old-2000 price series, year-on-year inflation was 4.6 percent in September and 4.3 percent in the nine-month period.

Bangko Sentral Deputy Governor Diwa Guinigundo said inflation is expected to average 4.46 percent in 2011, or within target. “Now, we are looking at inflation through the rest of the year, continuing to be lower than 5 percent,” said Guinigundo.

The Bangko Sentral, at the same time, revised its inflation forecast for 2012 to 3.05 percent from the previous estimate of 3.4 percent. The inflation outlook for 2013 was also adjusted to to 3.0 percent from 3.23.

“We are looking at a lower inflation path for both 2012 and 2013,” he said.

Guinigundo said the inflation forecast was reduced given the expectation of lower petroleum prices in the next couple of years, dragged down by a deceleration in global economic growth.

The Bangko Sentral cited the need to support domestic economic growth, which has recently moderated amid the slowdown in global recovery and weaker-than-expected public spending.


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