BSP chief: No urgent need to tweak policy rates

Amid the call of the International Monetary Fund (IMF) for tighter monetary and fiscal policies among emerging Asia markets, including the Philippines, the Bangko Sentral ng Pilipinas (BSP) said Thursday its current policy stance is appropriate given the current business environment. BSP Gov. Amando Tetangco Jr. said the country’s record-low policy rates is appropriate as the inflation outlook remains benign. Tetangco pointed out that the economic growth in advanced economies continued to be weaker-than-expected as emerging market economies, including the Philippines, registered surprising economic growths. “The recovery turned out to be weaker than expected. So we basically maintain the stance of monetary policy and we continue to do that given that the inflation picture remains favorable," the BSP chief told reporters. The policy-setting Monetary Board kept its record-low borrowing rate at 4 percent and lending rate at 6 percent. The IMF said Thursday that emerging economies in Asia should start tightening their monetary and fiscal policies as there are signs of inflationary pressures due strong influx of investment capital. But Tetangco said there is no urgent need for the Philippines to tweak its key policy rates as the country’s inflation outlook remains manageable and stable. “That depends on circumstances and conditions in individual countries. Like in our case, if you look at history of what we have done, we have implemented the liquidity-enhancing measures [in] 2008. As the financial markets stabilized and as the economy showed signs of recovery, we started to unwind early this year," he explained. As early as Jan. 28, the BSP began phasing out crisis-related measures as the global economy is gradually recovering. Crisis-related measures that were tweaked included the reduction of the peso rediscounting budget to P40 billion and further to pre-crisis level of P20 billion from P60 billion and the restoration of the loan value of all eligible rediscounting papers to 80 from 90 percent of the borrowing bank’s credit instrument. Monetary authorities decided to maintain the reserve requirements for banks. As part of its liquidity-enhancing measures to cushion the impact of the global financial meltdown in 2008, the BSP slashed the reserve requirement of banks to 19 percent from 21 percent to release more liquidity into the financial system. - VE/OMG, GMANews.TV