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MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) on Thursday kept key interest rates unchanged.
In a statement, the BSP said its policy-making Monetary Board (MB) decided against changes to its rates, which stand at four percent for the overnight borrowing or reverse repurchase (RRP) and at six percent for the overnight lending or repurchase (RP) facility.
The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were also maintained accordingly. Similarly, the reserve requirement ratios were kept steady as well.
In deciding to stay its course, the MB cited "a favorable inflation environment," with its full-year forecast remaining at the lower half of the three to five percent target range for 2012 and 2013.
The MB also cited the gradual strengthening of the domestic economy despite the fragile global conditions.
While high fuel prices remain risks to the inflation outlook, "the weak global economy and the stable peso could provide a moderating effect on inflation," the BSP said.
"The uncertainty in the factors affecting the outlook for inflation therefore suggests a need for a pause in monetary policy adjustment. A prudent pause allows policymakers to better assess how the upside and downside risks to inflation will play out and enables the cumulative 50-basis-point reduction in policy rates earlier in the year to continue to work its way through the economy," it added.
Growth forecast raised to 4.4%
In a research note, HSBC said the BSP decision "reflects stronger growth outlook as well as easing inflationary pressures."
"However, with growth picking up in the coming quarters and ample liquidity in the system, price pressures tilt on the upside. As such, we expect the BSP to keep rates steady for the rest of the year to monitor price behaviors," Trinh Nguyen, HSBC economist, said.
Given the recent pickup in economic activity, HSBC has increased its Philippine growth forecast to 4.4 percent from the earlier 3.6 percent.
"The next hike will be in 1Q 2013, when inflation is expected to breach the three to five percent target," Nguyen said
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