A More Hawkish Filipino Monetary Policy Statement

February 12, 2011

Bangko Sentral ng Pilipinas again left its key repo rate at 6.0% and reverse repo rate at 4%.  The central bank is one of very few in Asia not to have begun raising rates, and the point is made in a released statement last Thursday that food price inflation has affected overall Filipino inflation by less than the impact felt by other economies.  Monetary officials expect inflation to stay within the 3-5% target both in 2011 and 2012.  Six rate cuts were implemented between December 2008 and July 2009 totaling 200 basis points in all.  That was the last time rates were changed.

Nonetheless, the statement serves notice of a higher state of alert against future inflation.  It explicitly says that price risks have tilted further to the upside, and indicates a readiness “to undertake monetary action to arrest a potential build-up in inflation expectations and contain the second-round effects of supply shocks.”

The next Policy Board meeting is scheduled for March 24.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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