Thursday, December 13, 2012

Philippines holds rate steady, economy picking up speed

    The Philippine central bank held its key interest rate steady at 5.50 percent, as widely expected, saying the inflationary outlook is manageable and the domestic economy is starting to pick up speed on the back of strong demand and buoyant business sentiment.
    Bangko Sentral ng Pilipinas (BSP) said this year's four rate cuts, for a cumulative reduction in the key overnight borrowing or reverse repurchase facility of 100 basis points, were working their way through the economy and third quarter economic growth was stronger than expected.
    "In the months ahead, adequate liquidity and strong bank lending are expected to continue to support domestic economic activity and sustain the economy's momentum," the bank's monetary board said in a statement after a meeting.
    The Philippine Gross Domestic Product rose by 1.3 percent in the third quarter from the second, for an annual expansion of 7.1 percent, up from 6.0 percent in the second quarter, driven by private spending and fiscal stimulus.
    "Moreover, global economic activity as stabilized in recent months, although fiscal consolidation and financial market stresses in advanced economies continue to temper overall market sentiment," the bank said, adding that global economic prospects are likely to stay subdued and this will reduce upward pressure on commodity prices.

    Inflationary expectations in the Philippines are in line with the bank's 3-5 percent target, the bank said. Headline inflation fell to 2.8 percent in November from 3.1 percent in October. The BSP has forecast inflation this year of 3.3 percent, rising to 3.9 percent next year.
    The BSP was expected to keep rates on hold at its meeting following a statement last month by the governor that the policy stance appeared to remain appropriate given the high growth rate and low inflation.


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