The Philippine central bank kept current low interest rates on hold on Thursday as benign consumer price pressures gave the bank space to sustain its support for the Philippine economy.
The Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) decided to keep benchmark overnight borrowing and lending rates at record lows of 3.5 and 5.5 percent at its meeting on Thursday. Policy rates have been at these levels since October, 2012. Interest rates on special deposit accounts and reserve requirements for banks were also unchanged.
"The MB noted that while global economic conditions remain challenging, prospects for domestic activity remain robust, supported by buoyant domestic demand and favorable consumer and business sentiment," BSP Governor Amando M. Tetangco Jr. said.
Consumer price inflation in the Philippines has averaged at 2.8 percent by September this year. The inflation rate, which is lower than the official target range of 3 to 5 percent, came despite record-high rates in the country's money supply.
Domestic liquidity grew by 30.1 and 30.4 percent in July and August, respectively--rates of growth not seen in the last decade. Tetangco said the growing economy has been able to successfully absorb this additional cash, which instead of fueling consumption has been diverted to productive sectors.
"With bulk of (bank) lending going to productive sectors of the economy, the improvement in the economy's absorptive capacity is expected to be sustained, helping moderate price pressures," Tetangco said.