|
THE
Bangko Sentral ng Pilipinas (BSP) reduced on Thursday
the rate at which it borrows from or lends to banks on
direct basis, and by such also helped blunt the impact
of the strong peso on the foreign-exchange earnings of
more than 8 million overseas Filipinos and of the
long-suffering export sector.
The
reduction was the third in a series since October and
brought the BSP’s borrowing rate another 25 basis points
lower to 5.25 percent and its lending rate to just 7.25
percent.
“In
deciding to cut the policy rates, the monetary board
noted that the inflation outlook continues to provide
scope for further monetary policy easing.
“Inflation remains likely to fall well below the 4
percent to 5 percent target range in 2007 and within the
4-percent plus or minus one percentage point target in
2008,” BSP Governor Amando M. Tetangco Jr. said at a
briefing after their Monetary Board meeting.
It was
their final rate-setting meeting for the year.
The
decision underscores the importance with which the BSP
has given to inflation and its outlook 18 to 24 months
down the line, to the extent that prices my still be at
risk from higher oil and certain food items.
According to Tetangco, demand indicators remain in step
with modest demand growth and that “these have exerted
limited price pressures.”
He
particularly noted that peso liquidity growth has slowed
the past six months, a manifestation of moderating
inflationary pressures and the expected result of
monetary measures first implemented in May.
“Risks
to the inflation outlook consist mainly of oil and food
price pressures stemming from world markets. These risks
remain manageable. While the firm peso has tempered the
impact of higher import costs, developments in global
oil and non-oil commodity prices bear close monitoring
because of possible spillover effects on domestic
prices,” Tetangco said.
His
deputy, Diwa C. Guinigundo, said the 25 basis point rate
cuts “will help the BSP moderate the rapid appreciation
of the peso” that has led some legislators to call for
measures to relieve the plight of exporters and of OFW
families.
Domestic
analysts previously anticipated the rate cuts given that
the US Federal Open Market Committee, the US equivalent
to Manila’s monetary board, introduced its own
25-basis-point cut earlier this month.
A stay
in the rate settings would have widened the interest
differential and likely increase the inflow of foreign
exchange to the Philippines and make monetary management
more complicated for the BSP. |
