Financial IQ Philippines Quick Hit(s):
More reasons to find alternate investment vehicles aside from typical bank products (such as savings, time, money market, etc).
Monetary authorities will likely keep interest rates low this year and growth should remain on a solid footing, aided by strong domestic consumption and higher government spending, the Bangko Sentral ng Pilipinas (BSP) chief yesterday said.
Any adjustment to interest rates would depend on the outlook for inflation and the economy’s performance, central bank Governor Amando M. Tetangco, Jr. added.
“Businesses could expect BSP to keep interest rates at the low level in 2013,” Mr. Tetangco told a business forum.
“In 2013, we foresee continued solid economic growth and stable prices, a relatively stable exchange rate and a responsive banking system that is stable to withstand external shocks.”
The central bank’s policymaking Monetary Board cut key rates by 25 basis points four times -- twice in the first quarter, another in July and then in October. Policy rates -- the reference for interest rates -- currently stand at record lows of 3.5% and 5.5%, respectively, for overnight borrowing and lending.
Central bank officials have said that monetary policy was designed to boost economic growth and to manage strong capital inflows. Last year, the peso was emerging Asia’s second-best performing currency after the South Korean won.
Foreign investors have been attracted to the Philippines, due to strong domestic demand and higher state spending that have keep the Southeast Asian economy resilient despite slowdowns in key export markets in China, Europe and the United States.
In the third quarter of 2012, the Philippines had annual economic growth of 7.1%, the second fastest in Asia after China. The rapid expansion makes it likely that growth will surpass the Philippine government’s 5-6% full-year target.
Mr. Tetangco said policy makers would continue to watch global developments to assess their impact on domestic growth and consumer prices.
“We will sharpen our economic surveillance of shifts in domestic and global dynamics, including any brewing asset price pressures,” he said.
Monetary authorities will meet on Jan. 24 to review policy.
Based on a schedule released yesterday, this month’s meeting will be followed by one on March 14. Succeeding policy meetings will be on April 25, June 13, July 25, Sept. 12, Oct. 24 and Dec. 12.
The Monetary Board meets every six weeks to set policy rates, primarily to manage price stability. Inflation is expected to ease to 3.1% in 2013, well within the target of 3-5%.
Mr. Tetangco reiterated that the central bank would keep a market-determined exchange rate, adding that the peso has been moving in step with other regional currencies.
The BSP will maintain a market-determined exchange rate and comfortable level of reserves while continuing to keep external debt at sustainable levels, he said.
http://www.bworldonline.com/content.php?section=TopStory&title=Interest-rates-to-stay-low&id=63764
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