Philippines: Central Bank maintains policy rate, adjusts SDA rate
January 24, 2013
At its 24 January monetary policy meeting, the Central Bank left its Reverse Repurchase rate unchanged at a record-low of 3.50%, in a decision expected by the market. At the same time, the Bank decided to lower interest rates on its Special Deposit Account (SDA) facility to 3.00%. Previously, the SDA rate - a short-term product that aims to withdraw excess liquidity from the financial system - had been priced at a premium above the policy rate. The Central Bank stated that "the operational refinement in the SDA facility will help enhance the ability of the BSP to ensure that liquidity remains adequate to meet the requirements of the growing economy". By setting a lower SDA rate, monetary authorities aim at containing capital inflows into the country, which have caused the Philippine peso to strengthen to an almost five-year high in January.
According to the Central Bank, "the Monetary Board's decision is based on its assessment that the inflation environment remains manageable". Policymakers noted that global economic activity has stabilized but downside risks prevail. On the domestic front, the Bank expects the economy to continue growing at a solid pace.
Regarding price developments, monetary authorities reaffirmed that the "inflation outlook appears to be evenly balanced around the baseline forecast path".