BSP sees no need for add’l stimulus

MANILA, Philippines - The Bangko Sentral ng Pilipinas said yesterday additional stimulus is not necessary at this time as demand remains strong and inflation remarks within expectations.

“Adjustments in the BSP’s monetary policy settings still hinge largely on the confluence of domestic demand and supply factors. Our most recent assessment of the policy stance suggests that current policy settings remain appropriate,” Tetangco said.

Tetangco said domestic demand continues to be strong amid ample liquidity in the financial system. At the same time, inflation is expected to fall within the two to four percent target range this year and the next.

Tetangco also said the volatility in global financial markets and uncertainty in the path of oil prices in international markets support the current policy settings.

Tetangco made the comment after central banks in South Korea and in Thailand cut their key policy rates last week to support economic growth. Their counterparts in Malaysia and Australia, meanwhile, kept benchmark interest rates steady earlier this month.

“The divergence in monetary policy settings across the region could contribute to financial market uncertainty and capital flow volatility in the short term,” Tetangco said.

“Together with the prolonged period of low interest rates and liquidity enhancement measures in advanced economies, the recent decline in interest in Asia could push investors to continue to search for yield,” he continued.

The BSP’s policy-making Monetary Board last month left the overnight borrowing and overnight lending rates unchanged at four percent and six percent, respectively. The move was owed to inflation expectations falling within the target ranges for this year until 2016 and to the rosy prospects of domestic economy.

Last year, the central bank raised the key policy rates by a total of 50 basis points in order to anchor inflation expectations.

“We continue to monitor global developments and how these might potentially affect the domestic economy, including in terms of overall liquidity,” Tetangco said.