Bangko Sentral keeps interest rates unchanged

Monetary authorities on Thursday did not tweak interest rates as the economic environment remains well suited to rein in inflation and provide a springboard for growth. 

 

In a briefing, Bangko Sentral Governor Amando Tetangco Jr. announced the benchmark interest rates were kept steady but interest rates for the central bank Special Deposit Accounts (SDA) were cut. “The Monetary Board maintains policy rates but fine tunes SDA facility,” he said. 

 

The Monetary Board clipped the interest rates of SDA to 3 percent regardless or tenors effective immediately, Tetangco added, noting this will help “the BSP manage liquidity.”

 

SDAs were priced at a premium over benchmark interest rates. 

 

“The Monetary Board also decided to rationalize the BSP’s SDA facility consistent with international banking practice,” Tetangco said, referring to the policy-setting meeting for the year. 

 

Interest rates were kept at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending. 

 

Since it last cut policy rates in October, the central bank has used macroprudential tools in managing capital flows, like raising the capital requirement for banks in positioning foreign exchange forwards and prohibiting non-residents from investing in central bank SDA.  

 

“The recent decision was based on assessment that inflation environment remains stable,” said Tetangco.

 

The move was in line with analysts’ expectations that benchmark interest rates steady near-term. 

http://www.gmanetwork.com/news/story/291437/economy/moneyandbanking/bangko-sentral-to-use-macroprudential-tools-vs-speculative-money-analysts

 

“Inflation remains manageable while GDP growth has been steady,” said Jeff Ng, Singapore-based economist at Standard Chartered Bank Plc, who projected that interest rates will be kept unchanged. 

 

Ng projected the Bangko Sentral would instead use macroprudential tools. 

 

Last year, inflation settled at 3.2 percent. 

 

Socioeconomic Planning Secretary Arsenio Balisacan sees gross domestic product (GDP) growth hitting 6.5 percent in 2012. 

 

This year, the Bangko Sentral targets a 3 to 5 percent inflation rate and the the Development Budget Coordinating Committee sees the economy growing 6 to 7 percent. 

 

“The BSP also stands ready to deploy additional macroprudential measures to address any potential misalignment in asset prices.” Tetangco said. — VS, GMA News