Record Low 4.0% Overnight Borrowing Rate Retained in the Philippines

June 3, 2010

A significant minority of analysts had thought Bangko Sentral ng Pilipinas would begin tightening this month, but a statement released by monetary policy makers defended the status quo with downwardly revised inflation forecasts based on lower energy prices, slower domestic liquidity expansion, and the potential growth-dampening effects of the European debt crisis.  Filipino officials now project CPI inflation at 4.7% in 2010, revised form 5.1%, and 3.6% next year.  That puts such within target.  The overnight borrowing and lending rates have been at 4.0% and 6.0% since a 25-basis point reduction in July 2009.  That cut culminated 200 basis points of ease begun with 50-bp moves in December 2008 and January 2009 and followed with earlier 25-bp cuts in March, April, and May of last year.  The statement today leaves vague the timing of the central bank’s first rate hike, concluding, “The Board is prepared to recalibrate monetary policy settings when necessary to safeguard price stability.”

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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