Philippines Monetary Policy


Central Bank keeps benchmark rate unchanged in March

At its 14 March monetary policy meeting, the Central Bank left its Reverse Repurchase rate unchanged at 3.50%, in a decision expected by the market. At the same time, the Bank decided to further lower interest rates on its Special Deposit Accounts (SDA) facility by 50 points to 2.50%, following an unprecedented cut below the benchmark rate to 3.0% in January. The move comes as a response to the large inflow of capital that has driven the Philippine peso to a near five-year high, raising fears about the creation of an asset bubble in the country.

According to the Central Bank, "the Monetary Board's decision to maintain the policy interest rates at their current levels is based on its assessment that the inflation environment over the policy horizon is likely to remain manageable".

Moreover, monetary authorities stated that the "latest baseline forecasts have risen slightly due to the higher inflation outturns in recent months but continue to track the lower half of the target range for 2013 and 2014".

Meanwhile, in a recent speech, Central Bank Governor Amando Tetangco announced that monetary authorities are interested in adopting an interest rate corridor in the medium term, as a single policy tool for inflation targeting is not enough to face current global imbalances.

Consensus Forecast panellists see the Reverse Repurchase rate at 3.69% in 2013. For 2014, panellists expect the Reverse Repurchase rate to rise to 4.14%.

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Philippines Monetary Policy Chart

Philippines Monetary Policy March 2013

Note: Reverse Repurchase Rate in %.
Source: Central Bank of the Philippines (BSP).

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