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THE
Bangko Sentral ng Pilipinas believes inflation would
slide down further this month and gave hints it will
keep its short-term interest rates at present levels.
Bank
governor and Monetary Board chairman Amando Tetangco Jr.
told reporters inflation was forecast to range from 3.0
percent up to 3.6 percent in February, so wherever it
settles, it will still be lower than the 3.9 percent of
January.
Inflation, along with a host of other macroeconomic
numbers making up the brew that determines whether
domestic interest rates move up or down the scale, is on
track to trend down towards yearend, according to bank
officers.
He said
their forecast is based on the drop in domestic oil
prices, the sustained strength of the peso, and the
diminishing base effects of the higher value-added tax
rate of 12 percent.
In
December, liquidity was tracked to be 21.4 percent, the
highest in three years, but Tetangco said latest data
suggest this was not considered a threat—as it has not
yet interrupted the downtrend in inflation. “Liquidity
is definitely not a threat at this time.”
A
rapidly growing money supply would normally kick up
inflation as more pesos chase after goods and services,
the supply of which may not be growing in step.
And so,
as Deputy Governor Diwa Guinigundo said earlier this has
not happened because the demands of the economy have
also grown by more or less the same token.
The
central bank had not made adjustments to its short-term
interest rate since October 2005. This is the rate on
which the central bank borrows from or lends to the
banks on a 24-hour basis.
They
help determine private banks’ cost of funds that in turn
determine whether one can borrow from them at a higher
or lower rate. |
