MANILA, Philippines - Monetary authorities are expected to closely watch how the economy fared in the first quarter of the year to determine the policy stance to be taken by the Bangko Sentral ng Pilipinas (BSP).
BSP Governor Amando Tetangco Jr. said in an interview with reporters that the Monetary Board would determine its next policy action depending on the gross domestic product (GDP) growth that would be announced by the National Statistical Coordination Board (NSCB) sometime in May.
“It would be interesting to see the growth rate in the first quarter which would be (released) in May,” Tetangco stressed.
Earlier, Socioeconomic Planning secretary Cayetano Paderangga Jr. said the country’s GDP in the first quarter of the year likely grew faster than the 3.7 percent booked last year and the 4.6 percent growth registered in the first quarter of 2011.
Tetangco explained that monetary authorities would also assess the country’s inflation path amid the volatile oil prices in the world market.
The BSP has set an inflation target of between three percent and four percent for 2011 to 2014. Based on its latest inflation forecast, the central bank sees inflation averaging 3.1 percent this year and 3.3 percent next year.
Inflation eased to 2.6 percent in March from 2.7 percent in February, bringing the average inflation to 3.1 percent in the first quarter of the year.
“We’ll have an overall view of the inflation outlook and on that basis we’ll make an assessment of the stance of policy. If there is a need to change, we’ll do so but in this point in time we decided to pause,” he added.
After slashing interest rates by 50 basis points, the BSP decided to keep policy rates unchanged last April 19 as easing inflation has given authorities more room to pause after two rates cuts this year.
As such, interest rates remained at a record low of four percent for the overnight borrowing rate and at a record low of six percent for the overnight lending rate.
The BSP reduced interest rates by 25 basis points last Jan. 19 and by another 25 basis points last March 1 due to benign inflation outlook and fragile world economic growth.
The BSP would also closely watch possible second round effects such as higher fares for jeepneys, taxis, MRT and LRT as well as clamor for higher wages arising from soaring oil prices in the world market
Likewise, Tetangco added that monetary authorities would also continue to assess the impact of the previous rate cuts on the economy.