Bangko Sentral cuts policy rates 25 bps to previous lows

(Updated 6:11 p.m.) The Bangko Sentral ng Pilipinas (BSP) lowered its policy rates anew by 25 basis points on Thursday to previous record low levels because inflation remains manageable.   BSP Governor Amando Tetangco Jr. said in a statement the policy-setting Monetary Board reduced interest rates by 25 basis points, which brought the overnight borrowing rate to a record low 4 percent and the overnight lending rate to 6 percent. Reduced accordingly were the interest rates on term reverse repurchase facility and repurchase facility and special deposit accounts (SDA) facility.   Thursday’s move by the Bangko Sentral’s Monetary Board was second in the quarter that key Philippine rates were reduced since Jan. 19 when the BSP lowered the rates by 25 basis points.   The decision was based on a Monetary Board assessment that the outlook for inflation remained within 3-percent to 5-percent forecast by monetary authorities, Tetangco noted.   Domestic demand continues to grow at a modest pace influenced weaker demand from global markets, according to the BSP chief, citing another consideration by its Monetary Board to lower interest rates.   Global economic headwinds are expected to tame the fiscal and banking sectors in the face of fragile confidence among markets.   “Given these considerations, the Monetary Board is of the view that the benign inflation outlook has allowed further scope for a measured reduction in policy rates to support economic activity and reinforce confidence,” said Tetangco.   “Going forward, the BSP will continue to monitor emerging demand and price developments to ensure that monetary policy settings remain consistent with price stability while being supportive of non-inflationary economic growth,” Tetangco added.   Philippine economic managers under the aegis of the Development Budget Coordination Committee (DBCC) see the economy in gross domestic product terms accelerating 5 percent to 6 percent this year, from 3.7 percent last year.   The Monetary Board kept its inflation forecast at 3.1 percent this year and at 3.4 percent next year despite increasing oil prices in the world market, said BSP Deputy Governor Diwa Guinigundo said   “Basically there was no fundamental change in the forecast. We have the same outlook for both years,” he explained.   Despite the soaring oil prices due to the tension in Iran, he explained that monetary authorities that   Inflation will remain at the lower range of government’s inflation target, according to central bank’s deputy governor.   Monetary authorities assumed $90 and $110 per barrel of oil in their inflation forecast, Guinigundo noted.   “It is not alarming per se. What is alarming is continued increase and if there is consistent climb in oil prices, and prolonged at that. Monetary policy will have a scope for dealing with oil price adjustments in the world market,” Guinigundo added. — VS, GMA News