Bangko Sentral keeps monetary policy steady

By DANESSA O. RIVERA, GMA News

Published October 23, 2014 4:11pm

(Updated 6:42 p.m.) Monetary authorities decided to take a break in tightening policy settings, keeping lending and borrowing rates, reserve requirement and the yield of special deposit accounts (SDAs) steady as the inflation outlook is seen as manageable, Bangko Sentral ng Pilipinas chief announced Thursday.

In a press briefing after the policy-making body's meeting Thursday, Bangko Sentral Governor Amando Tetangco Jr. said the Monetary Board kept the overnight borrowing rate unchanged at 4 percent and overnight lending at 6 percent.

Bangko Sentral's Monetary Board also kept the yields of its special deposit accounts (SDA) facility steady at 2.5 percent for all tenors, the governor said.

It also kept the reserve requirement for thrift banks at 8 percent and for universal and commercial banks at 20 percent.

"The Monetary Board's decision is based on its assessment of a more manageable inflation environment, based on latest baseline projections inficsting a within-target inflation for the policy horizon," Tetangco said.

An expected move

The move was expected after inflation in September eased, Bank of the Philippine Islands lead economist Emilio Neri Jr. told GMA News Online.

"We actually expected them to pause from the tightening moves, since we may have already seen the peak," he said.

Tetangco noted inflation expectations have remained broadly stable, supported by resilient domestic demand conditions amid adequate domestic liquidity and robust bank lending growth.

"Given these considerations, the Monetary Board deemed it prudent for the time being to allow previous monetary responses to continue to work their way through the economy," he said.

Preemptive in nature

Policy rates were tweaked twice this year from record lows since October 2012, as well as the SDA rates and reserve requirement for all banks.

These previous actions were preemptive in nature, Neri said. "So, enter 2015. We're well within the full year target and they have space to do more."

Inflation forecast for 2014 was lowered to 4.4 percent from 4.5 percent earlier, Deputy Governor Diwa Guinigundo said in the same briefing.

Inflation forecast in the next two years were also lowered to 3.7 percent from 3.8 percent in 2015 and 2.8 percent from 3 percent in 2016, the deputy governor added.

Among the factors that pulled down the inflation path is the decline in fuel prices, Guinigundo said.

"We noted a big decline in oil prices particularly for Dubai crude oil... Futures prices of Dubai, which is extracted from Brent oil, also indicated lower prices," he added.

Guinigundo said the other downside of the inflation outlook was the gross domestic product, "which would indicate that the demand for commodities is also expected to moderate." – VS, GMA News

Tags: bangkosentralpolicyrates, monetaryboardpolicyrates