THE Bangko Sentral ng Pilipinas (BSP) will likely keep its policy rates unchanged when the Monetary Board meets on Thursday for the last time this year while ensuring credit growth remains consistent with the country’s long-haul growth program, a regional banking giant said.
In a commentary, the DBS Bank said the BSP will likely be concerned more with credit growth in the country than with the path of inflation in the
coming months.
“Bangko Sentral ng Pilipinas is likely to keep its key policy rate unchanged this week. GDP [gross domestic product] growth disappointed in the third quarter of 2014 on slower fiscal spending, and the most recent budget data suggests that fiscal spending has not picked up as yet in October. Meanwhile, CPI [consumer price index] inflation slowed to a one-year low of 3.7 percent in November on lower crude oil prices,” the DBS Bank said.
“The central bank may still look to tweak the rates on the special deposit account [SDA] to keep a check on liquidity growth in the financial system,” it added.
The central bank has kept the monetary levers unchanged to allow the policy adjustments made in July and September work their way in the economy and as moderating inflation effectively gave the monetary authorities policy space to maneuver.
The last time the central bank hiked the SDA interest rates was on September 11, with a 25-basis-point hike to 2.5 percent. This was the second SDA interest-rate hike this year.
The DBS Bank said the BSP has kept a good eye trained on liquidity growth best betrayed by bank-lending data.
The BSP is wary of excessive liquidity growth given that loan growth remains high, at around 20 percent, despite policy tightening earlier this year.
The DBS Bank expects the central bank to end the year with the borrowing rate at 4 percent and the ending rate at 6 percent.
“Any policy-rate adjustment, however, is unlikely to be seen in the near term. The sharp moderation in GDP growth has taken almost everyone by surprise. Steady rates are on the cards for now,” the bank said.