The Bangko Sentral will likely proceed with its plan to exit stimulus policies by withdrawing measures introduced to boost money supply during the global financial crisis, Assistant Governor Cyd Amador said.
“We think there’s momentum to exit,” Amador said in an interview. Authorities were reviewing the size, pricing and structure of the so-called “rediscounting facility,” which allows lenders to tap central bank funds using loans they’ve extended as collateral, she said.
Low interest rates in the US and Europe and faster economic growth in Asia are spurring capital flows into the region’s economies, prompting policy makers from China to India to start curbing excess money supply.
The Bangko Sentral said last month it would increase its so-called rediscounting rate, one of the interest rates it charges lenders for borrowing from it.
“By reviewing the rediscounting window, they’re signaling that they don’t want to see loose ends on liquidity, making sure they won’t add to inflation given rising food and energy prices,” said Bunny Bernardo-Recto, assistant vice president for treasury at Chinatrust Commercial Bank.
Inflation this month would likely range from 3.4 percent to 4.5 percent, and the targets for this year and next were intact, Deputy Governor Armando Suratos said. Consumer prices rose 4.3 percent in January from a year earlier, near the fastest pace in eight months.
The Philippines kept its benchmark interest rate at a record-low 4 percent for a fifth straight meeting on Jan. 28. The next policy meeting is scheduled for March 11.
“As far as inflation is concerned, we’re not seeing demand-side pressure, so why move interest rates now? There seems to be no compelling reason to do that,” Amador said.
Businesses surveyed by the Bangko Sentral expected the economy to rebound this year, fueled by overseas remittances, election spending and moderate inflation, Amador said. The central bank was watching for any signs of “rapid liquidity growth” as the appetite for emerging-market assets improved.
Bangko Sentral increased the amount it can lend to banks in exchange for loan documents and collaterals from the third quarter of 2008 to the first quarter of 2009. It also raised the ratio by which it values the loans under the rediscounting facility and cut the interest rate to half a point lower than its benchmark overnight rate. Bloomberg
