BSP keeps rates unchanged to support rehab efforts

The Philippines’ borrowing costs stayed unchanged for the third straight month, a move seen to support local demand for good and services and efforts to rehabilitate infrastructure damaged by typhoons.

Key policy rates remained at record lows after the Monetary Board (MB), the Bangko Sentral ng Pilipinas’ (BSP) policy making body, kept them unchanged after a Thursday meeting.

Overnight borrowing rates were at four percent while the overnight lending rate was kept at six percent, settings that the MB considers as “appropriate," BSP Governor Amado M. Tetangco Jr. said.

Rates on reverse repurchase and repurchase facilities as well as special deposit accounts were also retained.

However, the BSP, which is also tasked to maintain price stability, raised its inflation forecast for this year and next.

Instead of an earlier projection of 3.03 percent, the BSP expects commodity prices to rise to 3.28 percent. For next year, the BSP expects inflation to reach 4.02 percent, higher than the previous estimate of 3.42 percent. “The latest inflation forecasts reflected a slightly higher path, but remained to the lower bound of the targets over the policy horizon," the BSP chief added. Price pressures caused by crop losses owing to damages wreaked by two weather disturbances is not expected to have any significant impact on inflation.

Demand pressures on consumer prices continue to be limited as inflation expectations remain well-anchored, the BSP chief said.

The inflation target revision remains within the goals set by the central bank for the two periods, BSP deputy governor Diwa Guinigundo said.

For 2009, the inflation target is pegged anywhere between 2.5 percent and 4.5 percent and 3.5 percent and 5.5 percent next year. Among the factors considered in the revised inflation predictions were the El Niño phenomenon and the proposed increase in generation rates charged by the state-run National Power Corp. (Napocor). - GMANews.TV