Bangko Sentral slashes interest rates to new record lows

Interest rates of the Bangko Sentral ng Pilipinas are at new historic lows following the decision of its policy-making body – the Monetary Board – to bring the overnight borrowing rate down to 3.75 percent and the overnight lending rate to 5.75 percent with a cut of 25 basis points each.   But the BSP did not stop at that on Thursday during its regular rate-setting meeting. It also “reduced accordingly” the interest rates for special deposit accounts (SDAs), term repurchase loans and term reverse repurchase loans. The rate cuts were expected by many quarters within the finance and banking community, including JP Morgan, BPI Family Bank, and New York-based think tank Global Source Partners. “They cannot fall behind what the other central banks (are doing). The whole world is cutting rates. We cannot be seen as having relatively higher rates than the rest of the world or else we will just have a lot more hot money coming in which will cause problems,” said Jose Limcaoco, CEO of BPI Family Bank in a recent media briefing.   In a news release, the BSP said Thursday that the rate cuts taken as a whole are a “pre-emptive move against the risks associated with the global slowdown.”   The BSP added that while inflation “is likely to settle within the lower half of the 3-5 percent target for 2012 and 2013,” watchful regulatory eyes are focused on potential risks such as pending electricity rate adjustments, domestic demand pressures, and expectations of higher prices for some food products due to the prolonged drought in the US. — Earl Rosero/VS, GMA News