Paeng assures of low, stable rates

Bangko Sentral ng Pilipinas (BSP) Gov. Rafael V. Buenaventura assured yesterday that the BSP prefers to keep a low and stable interest rate regime contrary to some observations that he, and new Finance Secretary Jose T. Pardo favor an increase in interest rates.

During a question and answer forum at the Financial Executives Institute (Finex) general membership meeting at the Hotel Intercontinental yesterday, Buenaventura said that the BSP would adjust its rates depending on market factors.

According to him, "if (the) US Fed rate goes up and local inflation and peso are also going up, then we have no choice but to allow interest rates to go up," Buenaventura admitted.

He assured though that "we will try to keep it low," adding that "we have to provide some measure of relief of borrowers."

He also acknowledged that cheaper interest rates are, the less burden on borrowers.

He stressed that "it is not in the interest of the BSP to have higher interest rates, but neither is it in the interest of the BSP to keep low rates that are not sustainable."

Buenaventura assured that for the moment, inflation and the peso appear to be stable, so that no change in the interest rate policy would be made.

He said the BSP has kept its key overnight borrowing rate unchanged for the last six months and 22 days, except for one instance when the rate was even reduced.

During this week's regular weekly Treasury bill auction, the rates, which had been down for some time, was finally allowed to inch up following continued anxiety over a 25 basis point reported hike in US Fed rates.

It had also been reported that Buenaventura and former Finance Secretary Edgardo B. Espiritu had been at odds over the Finance department's continued lower interest rate policy at all costs.