(Friday, 11 19, 2004, Tribune)
The Bangko Sentral ng Pilipinas (BSP) left its key overnight interest rates unchanged at a policy meeting yesterday, but hinted that it was considering a monetary tightening by noting “emerging pressures” on the demand side.
The bank said inflation was still primarily being driven higher by supply-side factors such as higher oil prices, the reasoning it has used to justify leaving rates on hold.
But it said there were signs emerging that some of the pressure on inflation, which hit a five-and-a-half-year peak above 7 percent in October, was coming from the demand side.
“The board took note of some emerging pressures coming from the demand side,” deputy bank governor Amando Tetangco said.
The bank has kept its overnight borrowing rate at 6.75 percent and its lending rate at 9.0 percent since July 2003 when it cut rates by 25 basis points to match a similar move by the US Federal Reserve.
The bank's last policy adjustment was in February, when it increased liquidity reserves of local banks to 10 percent from 8 percent to protect the battered peso.
In a statement, the bank said there was a “greater need for readiness to undertake a swift monetary policy action.” It noted that core inflation, which excludes volatile food and energy prices, had also been rising and said there was a risk that expectations of higher prices would fuel a self-sustaining rise in inflation.
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