Filipino Central Bank Maintains Key Policy Rates but Fine Tunes SDA Facility

January 24, 2013

The overnight borrowing and lending rates of Bangko Sentral ng Pilipinas were left at 3.5% and 5.5%.  These were cut four times during 2012 — in January, March, July and October most recently — each time by 25 basis points.  The Monetary Committee’s statement called inflation prospects “manageable, noting inflation is in the lower half of its 3-5% target range and that expected inflation remains anchored to the target.  The domestic economy is projected to retain solid economic growth.  To contain the upside price risk posed by strong capital inflows, officials decided to modify the interest rate applied to its Special Deposit Accounts in the following manner.

The Monetary Board decided to set the interest rates on the Special Deposit Account (SDA) facility at 3.00 percent regardless of tenor, effective immediately, consistent with the BSP’s continuing efforts to fine-tune the operation of its monetary policy tools. Previously, the SDA rate was priced at a premium over the policy rate. The Monetary Board decided to rationalize the BSP’s SDA facility consistent with international central banking practice. Amid manageable liquidity growth and a benign inflation outlook, the operational refinement in the SDA facility will help enhance the ability of the BSP to ensure that liquidity remains adequate to meet the requirements of the growing economy.

The next Monetary Board meeting is scheduled for March 14th.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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