Mon, Jun 20, 2011 - Page 10 News List

Inflation still poses risk for Philippines: central bank head

Bloomberg

The Philippines still faces risks from inflation and the central bank is closely watching inflows and liquidity levels, Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday.

“There are still risks that can affect inflation, but right now we would like to first assess the impact of the measures we have adopted,” Tetangco told reporters in Laguna province, south of Manila.

The inflation target of 3 percent to 5 percent this year is “still at risk,” prompting policymakers to raise banks’ reserve requirement ratio this month, he said.

The central bank on Thursday ordered lenders to set aside more money as reserves while keeping its overnight rate unchanged at 4.5 percent, after raising the benchmark by a combined half a percentage point in its two previous meetings. Higher food and oil prices have prompted policymakers in Asia to increase borrowing costs and their currencies to gain to combat inflation even amid prospects of slowing global growth.

The central bank’s recent actions are “part of the normalization of monetary policy,” Tetangco said. “The question is, whether there is going to be a need for further action moving forward.”

Bangko Sentral cut banks’ reserve requirement ratio by 2 percentage points to 19 percent in November 2008 and a month later started cutting the benchmark rate to help spur growth amid a global slowdown. That easing cycle reduced the overnight rate by a total of 200 basis points.

Starting on Friday, the reserve ratio will rise to 20 percent, the central bank said.

“Any further rate increase will be data dependent,” said Jonathan Ravelas, chief strategist at Banco de Oro Unibank Inc in Manila, the nation’s largest lender.

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