 |
 |
|
|
       |
BSP mulls rate hike |
|
By Donnabelle L. Gatdula
The Philippine Star 09/21/2005 Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said yesterday that an interest rate rise is likely as the peso weakened against the dollar ahead of an expected increase in key US interest rates. "We are still not ruling out (a rate hike). We are looking at the overall picture," Tetangco said. The bank’s policy-making Monetary Board is to hold its monthly meeting on Thursday with pressure building for a rate increase. The peso slid closer to its record low of 56.45 against the dollar, hitting 56.37 during intraday trading before recovering to end the trading session at 56.235 to the dollar yesterday. "The interest-rate differential (the United States) and the growth in liquidity are two factors we are looking at. We are assessing the impact of these factors on future inflation," Tetangco said. He said a narrower interest-rate differential between the Philippines and the US, where the Federal Reserve could raise key policy rates at its meeting later today, could result in a shift in investments in favor of dollar assets. This possibility may then put pressure on the peso, Tetangco added. Some economists expect the BSP to raise its key interest rates by 25 basis points on Thursday. It would be the second increase this year. The bank’s overnight interest rates now stand at seven percent for borrowing and 9.25 percent for lending, after an increase of 25 basis points in April, the first adjustment in five years. Headline inflation jumped to 7.2 percent from a year earlier in August, exceeding the BSP’s forecast range of 6.6-7.1 percent. It brought the eight-month average rise to 8.1 percent, much more than the government’s full-year target of five to six percent. "We are assessing the implications on future inflation," Tetangco said when asked if the Monetary Board (MB) will come up with a decision on their policy rates within the week. The BSP chief reiterated their earlier stance that they acknowledged the possibility of adjusting their rates if necessary. "We are not ruling out (moving our rates) between now and before the end of the year," he said. Another BSP official explained that a rate increase could create a negative impact on the economy. "If the real interest rates will go up, the cost of borrowing will also go up thus, discouraging investments," the official said. A Merrill Lynch study earlier said that BSP may likely increase its overnight interest rates before the yearend to cushion the possible impact of rising consumer prices. "We expect the BSP to raise its reference interest rate further by the end of the year, which would send a credible signal that the monetary authorities are committed to tackling inflationary pressures," the investment research firm said. Merrill Lynch noted that "while accelerating inflation has been mainly fueled by supply-side factors, including high oil prices, there is a clear risk that price pressures could spread, leading to an upward shift in inflationary expectations." It said while the BSP has been on the conscious look out for these inflationary pressures, it may also consider using interest rates as a tool to cushion the impact of a rising inflation rate. "The authorities are aware of these risks and the central bank moderately tightened its monetary policy through an increase in the reserve requirement (to 21 percent from 19 percent) following an interest rate hikes in April. This is a step in the right direction, but may not be enough," it said. |
 |
Circular Letters/Memoranda |
|
Speeches/ Presentations |
|
Photo Gallery |
|
The 2008 RBAP Charter Symposium |
|
2008 CFI Awards |
|
Rural Banking Week Celebration Golf Tournament |
|
Client Satisfaction Survey for Licensing Management System of the Supervision and Examination Sector |
|
Financial Reporting Package 2008 |
|
BSP releases regulations on liquidity, market risk weighting |
