BSP leaves key rates unchanged

The Bangko Sentral ng Pilipinas said yesterday it would keep benchmark overnight rates unchanged, pending the outcome of the US Federal Reserve’s policy meeting next week.

The bank’s overnight borrowing rate stands at 9.5 percent and the lending rate at 11.75 percent.

"We decided to maintain BSP policy rates at the current levels," BSP Deputy Governor Amando Tetangco said after the bank’s weekly Monetary Board meeting.

"The decision was reached after considering relevant factors including the behavior of inflation and the prognosis on the scheduled meeting of the Fed on May 15," Tetangco said.

"We will wait until that meeting and see what the Fed decides. The Monetary Board will consider the interest rate issue again," Tetangco added.

The Philippines’ consumer price index rose 6.7 percent year-on-year in April. The Fed’s policy-making Open Market Committee meets on Tuesday and is widely expected to cut overnight lending rates by another half a percentage point.

The Philippines began easing the key rates from December and has reduced them by 550 basis points since jacking up overnight rates by 400 basis points in October to defend the fragile peso.

The recent peso weakness stems from renewed political uncertainty after the May Day attack on the presidential palace by loyalists of former President Joseph Estrada and ahead of the May 14 congressional elections.

Asked about the peso, Tetangco said: "Right now, the banks and other market players are cautious because of the forthcoming political exercise."