BSP cuts policy rates

MONETARY officials on Thursday cut by 25 basis points the Bangko Sentral ng Pilipinas’ (BSP) policy rates, a first since July 2009, to boost economic growth.
The rate cut, made during the first Monetary Board (MB) meeting for the year, was done after the Board maintained the rates in the past six consecutive policy meetings.
“The Monetary Board has concluded that the benign inflation outlook allowed some scope for a reduction in policy rates to help boost economic activity and support market confidence,” BSP Governor Amando Tetangco Jr. said in a briefing.
The cut reduced central banks overnight borrowing rate to 4.25 percent and the overnight lending rate to 6.25 percent.
The last time monetary officials implemented a rate cut was in July 2009 when it decreased by 25 basis points the policy rates to spur growth on back of within target inflation outlook until 2010 and weaker global economic activity.
That time, the overnight borrowing rate was lowered to four percent and the overnight lending rate to 6.25 percent.
Tetangco said monetary officials’ latest inflation outlook “remains comfortably within the target range” and the inflation expectations remains “well-anchored.”
Inflation target for this year until 2013 is a range between three to five percent.
The central bank chief said “pressures on global commodity prices are seen to continue to abate amid weaker global growth prospects.”
“However, the impact of strong capital inflows on domestic liquidity and the effect of geopolitical tensions in the MENA (Middle East and North Africa) region on global oil supplies will continue to pose upside risks to inflation,” he said.
He said that the Board believed that global economic growth would continue to slow in part due to the debt crisis in the Euro zone .
He cited that “although the US economy has been showing signs of improvement, it remains vulnerable to financial market volatility amid continued concerns about long-term fiscal sustainability,” he said.
“Amidst these developments, the Philippine economy is likely to face external headwinds in 2012. While the Philippine economy continues to expand, sustained domestic spending is expected to compensate for weaker external demand,” he said.
“The BSP shall continue to monitor emerging demand and price developments to ensure that monetary policy settings remain supportive of non-inflationary economic growth,” he said. [PNA]