Unchanged Monetary Policy in the Philippines

December 29, 2010

Bangko Sentral Ng Pilipinas retained its key 6.0% overnight lending and 4.0% overnight borrowing rates.  When the economy was contracting those rates were cut six times by a total of 200 basis points between December 2008 and July 2009, but no changes have occurred subsequently unlike the case at many other Asian central banks.  A new statement shows no urgency to begin tightening despite an average 7.5% rise of real GDP through the first three quarters of 2010.  Officials observed a continuing favorable inflation outlook.  On-year CPI inflation of 3.0% in November was marginally above October’s 11-month low and, more importantly, below this year’s 3.5-5.5% target range.  The price target in 2011 and 2012 will be 3-5% and is expected to be met by monetary officials and private analysts.  The non-inflationary potential growth rate of GDP is rising.  Money and credit are growing at appropriate rates, and asset prices are not excessive.  Officials promise to keep monitoring potential sources of future inflation like higher commodity prices and planned administered price hikes.  The first monetary policy meeting of 2011 is scheduled for February 7th.

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



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