 |
 |
|
|
       |
BSP mulls new rate increase by yearend |
|
By Donnabelle L. Gatdula
The Philippine Star 09/26/2005 The Bangko Sentral ng Pilipinas (BSP) is likely to consider another increase in its key interest rates by yearend, a local securities firm said over the weekend. "We expect more tightening from the BSP later in the year, but this will be mild, perhaps another 25 basis points," ATR-Kim Eng, in its latest report, said. "This is because downward pressure on economic activity is already being exerted by high oil prices and tight fiscal policy, and to reinforce these with unduly tight monetary policy would be detrimental to growth," ATR-Kim Eng said. In order of magnitude, ATR-Kim Eng said, the first two, high oil prices and tight fiscal policy, have the most impact in terms of slowing growth this year, and potentially next year. The BSP raised late last week its key interest rates by 25 basis points, the second such move this year, to tame rising inflation driven by higher oil prices. The BSP’s overnight borrowing rate now stand at 7.25 percent and the lending rate at 9.50 percent. The increase in the BSP’s overnight rates follows a similar quarter percentage point rise by the US Federal Reserve. In a separate review, ING Bank observed that the BSP is more worried now than in the past about high oil prices stoking supply-side pressure on inflation. The bank quoted BSP Deputy Governor Nestor Espenilla as saying that the latest rate hike was a pre-emptive move to preserve inflation target (7.9 percent for 2005) and avoid need for a drastic tightening later. The ING Bank said inflation has softened to 7.2 percent from a high of 8.5 early this year and the BSP’s forecast points to a further drop to seven percent in September. It noted that the latest BSP rate hike was the third monetary tightening this year. The first was a 25 basis points rate hike in April, which was inflation driven. The last two tightening monetary policies– a two percentage point hike in the banks’ reserve ratio in July and the latest round of 25 basis point increase in key rates – were all currency driven. "This shows that the need to stem currency weakness is still at the top of BSP’s policy objective," ING said. The impact on the exchange rate, according to ING, is that the peso gained 0.14 percent to 56.245 to a dollar in a knee-jerk reaction to the BSP move. President Arroyo is counting on low interest rates to spur spending and investment as high oil prices erode corporate earnings and households’ disposable incomes. Accelerating inflation, caused in part by gains in oil costs, will likely result in another rate increase this year, said one analyst. |
 |
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 |
