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BSP sees no need to follow US Fed in raising rates |
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By Des Ferriols
The Philippine Star 05/05/2005 The Bangko Sentral ng Pilipinas (BSP) said it may not be necessary to raise its interest rates today, despite the continued rise in US interest rates. The Monetary Board (MB) of the BSP will convene today for its monthly policy-setting meeting, the first time it will meet after raising its policy rates by 25 basis points last month. BSP Deputy Governor Amando Tetangco said yesterday that the FOMC action was widely expected since the US Fed has been announcing its plan for a calibrated increase in interest rates for the last few months. "It only confirmed the Fed’s measured pace of interest rate action," Tetangco said. According to Tetangco, the BSP has already raised its policy rates last month and the decision was made mainly to calm inflationary expectations. "There may be no need for a further increase at this time," Tetangco said. "But we will continue to closely monitor developments and the inflation outlook." Tetangco ruled out any "significant monetary tightening", noting the slack in the economy and indications of possible moderation in output growth. In its first quarter inflation report, the BSP said the rise in inflation could put its 2006 inflation target at risk but future monetary action would be geared towards guiding inflationary expectations rather than attempting to dampen demand-side impulses. "We still see a deceleration towards 2006 although we would continue to review the numbers depending on what action will be taken on the demand to increase wages and transport fares," Tetangco said. The BPS has already increased its policy rates last month, firing what it called a "warning shot" to head off mounting inflationary pressures in the next 14 months. The language of its monetary decision fueled speculation of further calibrated increases in the BSP’s policy rates in order to restore the interest rate differential between US policy and benchmark rates. |
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