Central Bank of the Philippines Authorizes Another Hike in Reserve Requirements

May 8, 2014

The last interest rate changes at Bangko Sentral ng Pilipinas were done in 2012, four cuts that left the overnight borrowing and lending rates at 3.5% and 5.5%, respectively.  At the March 27 previous meeting, however, reserve requirements were tightened to 19% from 18%, and that move was followed up by announcement today of a second one percentage point reserve ratio hike set for May 30.  This action in today’s statement was explained as follows.

The Monetary Board noted that the balance of risks to the inflation outlook continues to lean toward the upside, with potential price pressures emanating from the possible uptick in food prices, as a result of expected drier weather conditions, as well as pending petitions for adjustments in transport fares and power rates. The adjustments in the reserve requirements are expected to help mitigate potential risks to financial stability that could arise from the strong growth in domestic liquidity. The Monetary Board believes that solid domestic economic activity provides room for the hike in the reserve requirements.

The next policy meeting is set for June 19.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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