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BSP to keep raising key rates in small quantities if oil prices continue to rise |
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By Paolo S. Romero
The Philippine Star 04/12/2005 The Bangko Sentral ng Pilipinas (BSP) is expected to adjust its policy rates in small, measured increments as monetary officials anticipate inflationary pressures to mount over the next 14 months due to the continued increase in oil prices. Sources from the Monetary Board (MB) disclosed yesterday that despite the initial hesitation to adjust the policy rates, monetary officials are keenly watching the actions of the US Federal Open Market Committee (FOMC) which was scheduled to meet again in May. According to sources, there could be measured increases in the BSP’s policy rates although there were no indications how high the BSP intends to go. Sources said the MB was carefully watching the interest rate differentials to be able to keep a respectable distance between US benchmark rates and the country’s own rates. BSP Deputy Governor Amando M. Tetangco went as far as saying that the MB decision last week was a "warning shot" although he would not say when and whether the MB was looking at an other adjustment in policy rates. For the first time since October 2000, the BSP raised its policy rates by 25 basis points, firing what it called a "warning shot" to head off mounting inflationary pressures in the next 14 months. The BSP said its target would stay at four-five percent for the whole of 2005 but the projected inflation rate has been adjusted from five to six percent to six to seven percent for the whole year. The MB raised the BSP’s policy rates to seven percent for the overnight borrowing or reverse repurchase (RRP) rate and 9.25 percent for the overnight lending or repurchase (RP) rate. |
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