Philippines holds steady on policy rates; inflation headed for target

By Susanna Moon

Chicago, June 19 – The Monetary Board of the Bangko Sentral ng Pilipinas again decided to maintain the overnight borrowing rate unchanged at 3˝% at its meeting on Thursday.

The bank also decided to keep its overnight lending rate unchanged at 5˝%.

The move is based on the bank’s assessment that the inflation path will likely keep within target over the policy horizon, the bank said.

Inflation is projected to settle in the upper half the target ranges of around 4% for 2014 and around 3% for 2015, although the latest baseline inflation forecasts have risen due to the higher inflation outturn in May and the inclusion of the potential impact of El Nino on food and utility prices, the release noted.

At the same time, the board decided to raise the interest rate on the special deposit account facility by 25 basis points to 2.25% across all tenors, effective immediately, according to a bank notice.

The SDA rate adjustment is meant to counter risks to price and financial stability that could come from ample liquidity, with a modest climb in interest rates “prudent amid robust credit growth,” the bank said.

The bank decided to keep key policy rates unchanged at its meeting on May 8.

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