Philippines’ Reserve Ratios Tightened

July 28, 2011

Bankgo Sentral Ng Pilipinas will raise reserve requirements by a whole percentage point effective August 5.  This decision was not expected and matches one at the June 16 policy meeting and implemented on June 24.  Interest rates were not changed at this time.  Previously, the Filipino official borrowing and lending rates, that is the reverse repo and repo rates, were increased by 25 basis points on March 24 and again on May 5.  Those rates are currently at 4.5% and 6.5%.  Six cuts from December 2008 to July 2009 reduced the key interest rates by 200 basis points. 

CPI inflation has risen from 4.3% in April to 4.5% in May and 4.6% in June, and a statement released today reasserts that price risks continued to be skewed to the upside.  Policymakers have a CPI target of 3-5%.

The statement leaves open the possibility of additional policy tightening in the second half of this year.  Remaining meetings are scheduled for September 8, October 20, and December 1. 

The Monetary Board believes that a prudent increase in the reserve requirement will help ensure that the inflation target will be met…. The BSP  remains watchful against any risks to the inflation outlook and will adjust policy and prudential settings as needed to preserve price stability and financial stability.

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



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