BSP Vows to Ease Monetary Policy to Spur Bank Lending
Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday that monetary policy is geared towards a further easing in order to spur banks to lend more and boost economic activity.
"The direction is for the relaxation of monetary policy," Tetangco told foreign correspondents.
Tetangco said the reintroduction of the tiering system on the central bank's overnight borrowing rate, made Nov. 2, is effectively monetary policy easing aimed at encouraging banks to lend more to the public, instead of placing their funds with the central bank.
"I think we need more information to determine its impact," Tetangco said.
Asked how much time should be given for the tiering scheme to work its way into the system, Tetangco said there was no timeframe at the moment.
"We will make an assessment when we meet," he said, referring to the next policy meeting Dec. 14.
Under current rates for the tiered system, the central bank pays 7.5 percent per annum for the first P5 billion lent to it for a day; 5.5 percent for the next P5 billion, and 3.5 percent for amounts above P10 billion.
Tetangco said the monetary authority is also keeping "a close watch" on rising domestic liquidity caused by strong foreign exchange inflows from overseas Filipino workers and portfolio investments, suggesting this could reverse the slowing inflation trend.
Domestic liquidity grew at a faster pace of 16.1 percent on year in October, from 14.5 percent in September.
Tetangco earlier said he expects the on-year inflation rate for November to decelerate to 4.5 percent to 5.2 percent, from October's 5.4 percent, due to lower commodity prices and the peso's continued strength against the dollar.
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Meanwhile, the central bank is expecting a balance of payments (BoP) surplus of $1.6 billion next year, Tetangco said.
The 2007 projection is less than the $2.8 billion BoP surplus forecast for this year. …