PH keeps interest rates at record low

MANILA, Philippines – Interest rates, a key monetary tool, are staying at record lows as long as the inflation environment remain benign and global issues that may pose a threat to local economy are kept at bay.

For the 8th time, the main policy making body of the Bangko Sentral ng Pilipinas (BSP) kept overnight borrowing at 3.5% and overnight lending at 5.5% at its October 24 rate setting, stressing that there is no need for additional stimulus at this point. 

These rates influence the decision of buyers of big ticket items, like houses, lots, condominiums and cars, as well as of businessmen who are pursuing expansion plans. These are key legs for the country’s economic growth.

“Latest baseline forecasts (for inflation) indicate that the future inflation path remains in line with the target range of 4% [to 5%] in 2003 to 2014, and 3% [to 4%] for 2015,” the BSP said in a statement.

Inflation in September accelerated to 2.7% from 2.1% in August.

“Prospects for domestic activity remain robust, supported by buoyant domestic demand and favorable consumer and business sentiment,” it added.

SDA rates

The BSP also kept the 2% rate for Special Deposit Accounts (SDA) and the reserve requirement ratios were also left unchanged.

The BSP is winding down its SDA facility to compel banks to fund productive activities.

“With the bulk of lending going to the productive sectors of the economy, the improvement in the economy’s absorptive capacity is expected to be sustained, helping to moderate price pressures,” it added. – Rappler.com