Policymaking Monetary Board to meet on Thursday
By Paolo G. Montecillo |Philippine Daily Inquirer
1:30 am | Tuesday, October 21st, 2014
Interest rates will likely be kept steady this week as the Bangko Sentral ng Pilipinas (BSP) uses the leeway given by stabilizing consumer prices to further cement the country’s real economic growth prospects.
Bank projections gathered by the Inquirer showed that a pause in the BSP’s current tightening cycle was all but assured as the policy-making Monetary Board meets this Thursday.
“The BSP is unlikely to go all-out at this juncture, particularly since there are now doubts over fiscal policy outlook going into 2015,” DBS analyst Gundy Cahyadi said in a note to investors on Monday.
DBS was one of nine banks that expect the BSP to keep its benchmark overnight borrowing and lending dates steady at 4 and 6 percent, respectively, this Thursday.
Monetary officials have been tightening policy settings since April of this year as inflation crept up from last year’s lows. The BSP’s main goal is to keep prices stable to protect consumers’ purchasing power.
It does so by adjusting interest rates and controlling the amount of money circulating in the economy.
Banks were told earlier this year to set aside more of their clients’ deposits as reserves. Yields on special deposit accounts and the BSP’s own deposit rates were also hiked to encourage banks to park more of their idle cash with the central bank.
These moves influence the amount of money banks lend to businesses and households, which affects consumer demand.
Other banks that see the BSP staying neutral for now are JP Morgan Chase, Citigroup, Bank of America, HSBC, Bank of the Philippine Islands, ING, BDO Unibank and Barclays.
“Since September, crude has dropped more than 10 percent, pulling down headline inflation in the Philippines; we expect food price pressures should also abate,” HSBC’s Trinh Nguyen said.
“The BSP will likely hold rates steady as headline inflation remains on target and uncertainty remains regarding the growth outlook,” she said.
In September, inflation averaged at 4.4 percent, lower than July and August’s 4.9 percent. BSP Deputy Governor Diwa C. Guinigundo last week said inflation likely “peaked” in August and lower readings should be expected in October to December.
The BSP wants to keep inflation this year between 3 and 5 percent.
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