Filipino Monetary Policy Tweaked as SDA Interest Rate is Raised to 2.25%

June 19, 2014

Inflation risks in the Philippines are skewed to the upside because of El Nino, which has generated weather extremes that could elevate food and utility costs.  The baseline inflation forecast sees consumer prices hovering in the upper part of this year’s 3-5% target band and falling within next year’s corridor of 2.4%.  Accordingly, the overnight 3.5% deposit and 5.5% lending rates were not modified.  These have been at those levels since four cuts in 2012.  Reserve requirements likewise, which had been raised at the prior two policy reviews, were not changed, either.  But the interest rate on Special Deposit Accounts was lifted by 25 bps to 2.25%.  It is hoped that this proactive tweak will help contain growth in domestic liquidity and enhance chances for in-target inflation in the policy horizon.  Economic growth has been generally buoyant but fell below 6% last quarter for the first time since late 2011.

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



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