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BSP leaves policy rates steady, but watches peso |
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(12 February 2004, Thursday - Philippine Daily Inquirer)
THE Monetary Board voted Thursday to leave the central bank's policy interest rates unchanged at 6.750 percent for overnight borrowing and 9.000 percent for overnight lending, saying its current stance was still supportive of the government's inflation and economic growth targets. |
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In a statement, however, the Bangkon Sentral ng Pilipinas (BSP) said it might still consider a "further active policy measure" to prevent a sharp and sustained fall of the peso against the US dollar, as such a scenario may bring inflationary pressures.
"The decision to maintain the monetary policy setting reflects the Monetary Board's belief that the current monetary policy stance is appropriately supportive of the price stability objective and is consistent with the need to ensure sufficient liquidity to sustain domestic demand," the central bank said. However, it said, "in the future, the monetary authorities may consider a further active policy measure to avoid the adverse inflationary implications of a sharp and sustained depreciation of the peso." Thursday's decision followed a surprising increase of 200 basis points in banks' liquidity reserve requirement the BSP announced last week to siphon excess liquidity to prevent speculation against the peso. After trading relatively stable below 56 to the dollar since the reserve hike announcement, the peso closed weaker Thursday at 55.975 to the dollar, compared with Wednesday's finish of 55.905 to the dollar. It traded at between 55.880 and 55.980 to the dollar on volume of 128 million dollars. Analysts see the central bank's policy tightening as preventing the peso from falling further after hitting an all-time low of 56.220 to the dollar during trading on Jan 29. on heightened political uncertainties ahead of the May 10 presidential election. BSP Governor Rafael Buenaventura attributed the peso's fall Thursday to weak regional currencies and corporate dollar demand. "Nothing unusual at this point," he said at a news briefing, noting that the peso was just range-bound. He said the monetary authorities "are always watching threats of inflation." However, the Monetary Board will want to see first the effects of last week's reserve hike on the currency market before making any further moves, he said. "The preemptive action of the Monetary Board has to be allowed to work first," he said. Asked what possible measures the central bank may take if pressure on the peso builds again, Buenaventura said a further reserve hike was one of them. "Or we could do other things, but I prefer not to discuss it. Why would I translate my next move to the market?" home | latest news |
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