MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) may not need to adjust current policy settings until the first quarter of next year, a member of the central bank’s policy-making Monetary Board said yesterday.
“There is no need to change policy settings and even SDA (special deposit accounts) rates for the rest of the year and probably until the first quarter of next year,” Felipe Medalla, a member of the Monetary Board, told reporters.
Medalla explained that his view is on account of manageable inflation expectations despite expected uptick in domestic liquidity.
“Inflation rate is now slightly below target and can inch up a bit as liquidity increases because of the SDA adjustments,” Medalla pointed out.
Overnight borrowing and lending rates are at 3.5 percent and 5.5 percent, respectively, since the start of the year.
The rates have been kept steady amid a robust economy that already expanded by 7.6 percent in the first half supported by a benign inflation environment.
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Inflation has so far averaged 2.8 percent in the first nine months of the year, below the BSP’s target of three to five percent. The rate is expected to remain within target despite a foreseen rise in domestic liquidity due to adjustments in the central bank’s SDA facility.
M3, the broadest measure of domestic liquidity, has been rising by more than 30 percent for July and August, owed to money flushed out of the SDA facility.
