Filipino Central Bank Engineers a Third 2013 Cut of Special Deposit Rate

April 25, 2013

Officials at Bangko Sentral ng Pilipinas left the main monetary policy signals unchanged.  The overnight borrowing rate (reverse repo) stays at 3.5%, while the overnight lending rate (repo) was held at 5.5%.  These rates had been cut four times in 2012 (January, May, July and October) but not subsequently.  As officials had done at previous meetings on March 13 and January 24, however, the Special Deposit Account rate (SDA) was sliced by 50 basis points and now becomes 2.0%.  Reserve requirements were not changed.

In explaining today’s action, emphasis was put on a satisfactorily low inflation picture and a desire to enhance the effectiveness of monetary policy.

The projected inflation path continues to track the lower half of the 4 ± 1 percent target range for 2013 and 2014. Moreover, the risks to the inflation outlook remain evenly balanced. Uncertainty over the strength of the global economy and the relative firmness of the peso are the key downside risks to the broad outlook for prices. ….The Monetary Board noted that the benign inflation environment and robust domestic growth prospects provided scope for further enhancing the efficiency of the operations for absorbing liquidity through the SDA facility. The adjustment is in line with the BSP’s continuing efforts to fine-tune its monetary policy instruments and thereby gain greater flexibility in conducting monetary operations, and also to ensure adequate liquidity for economic activity.

The fourth meeting of the Monetary Board this year is scheduled for June 13.

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

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