RTTNews - Thursday, the Philippine central bank ended its monetary easing that started in December 2008 as the economy showed signs of recovery from the global recession.
The Bangko Sentral ng Pilipinas held its key interest rate unchanged at a record low of 4%, in line with expectations. The interest rate on overnight lending or repurchase facility was kept at 6%.
In July, the central bank cut its key policy interest rate by 25 basis points to the current level.
Since December 2008, the central bank made a cumulative reduction of 200 basis points in its benchmark interest rate. The central bank also initiated liquidity enhancing measures.
Asian central banks have stopped cutting interest rates after seeing signs of economic recovery and demand rebound. In the second quarter, the Japanese economy grew 3.7% and China expanded 7.9%. Economic growth was 20.7% in Singapore.
The Monetary Board decision to maintain policy rates is based on its assessment that current monetary settings are appropriate and that inflation is expected to remain within target over the policy horizon, central bank governor Amando Tetangco said.
In July, headline inflation dropped to 0.2% from 1.5% in June, the lowest since March 1987. Exports grew 10.4% month-on-month in June, faster than a 10.2% rise in May.
The governor noted that a pause in the monetary easing will also allow more time for the authorities to consider incoming data on the balance of risks to inflation and growth as well as the likely trend of future economic activity, given the impact of other public policies.
While the current inflation outlook remains favorable, the expected global economic recovery may cause upward pressure on oil and other commodity prices, Tetangco said.
In the first quarter, the Philippine economy grew 0.4% annually, slowing from the 3.9% growth recorded in the year-ago period. The National Statistical Coordination Board is due to release second quarter economic performance data on August 27.
The Philippine banking system was resilient amid global financial crisis. Given this background, rating agency Fitch, earlier this week, maintained the stable outlook on the credit ratings of banks in the country.
In July, Moody's upgraded the Philippine foreign and local currency government ratings to Ba3 from B1.
The central bank said its monetary board is committed to maintain an appropriate monetary policy stance conducive to credit and investment growth, to the extent that the inflation outlook would allow.
Going forward, the board will continue to be guided by economic data, both domestic and external, paying close attention to the emerging risks to the inflation outlook as well as to indications of the strength of economic activity, Tetangco said.
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