No Change This Time in 4.0% Filipino Repo Rate

April 19, 2012

Monetary Board members at Bangko Sentral ng Pilipinas had eased key interest rates at their prior two meetings on January 19 and March 1 but elected today to leave unchanged the 4.0% overnight repo rate and 6.0% overnight reverse repo rate as well as reserve requirement ratios.  Authorities next meet June 14.  The baseline inflation forecast for this year and next sees such hovering in the lower half of a 3-5% target range, but a mix of inflation risk factors has tilted slightly to the upside because of elevated oil prices among other factors.  A statement on the central bank website explains the thinking behind today’s adoption of a wait and see stance:

A prudent pause allows policymakers to better assess how the upside and downside risks to inflation will play out and enables the cumulative 50-basis-point reduction in policy rates earlier in the year to continue to work its way through the economy.

Six repo rate cuts totaling 200 basis points were implemented from December 2008 to July 2009.  Then, Bangko Sentral ng Pilipinas became one of the last Asian central banks to begin a process of rate normalization, waiting until March 2011 before hiking the repo rate by 25 bps and doing a second 25-bp increase at the following meeting in May 2011.  That pair of increases in 2011 has now been reversed, returning the repo rate to its 4.0% cyclical low.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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