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BSP keeps low rates

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THE BANGKO Sentral ng Pilipinas has kept its key policy rates at historic lows, explaining that the move is aided by the modest rise in consumer prices.


The Monetary Board of the central bank kept the overnight borrowing and lending rates of the BSP at 4 and 6 percent, respectively. The rates were unchanged since July last year.


In keeping the rates steady, the Monetary Board cited the growth of the economy at a robust pace without the worrisome rise in consumer prices, BSP Governor Amando Tetangco Jr. said in a briefing yesterday.


Low interest rates are meant to spur economic growth, especially last year when most countries worldwide experienced a contraction or a slowdown. However, experts said, keeping interest rates too low for too long could result in inflationary pressures.


In the case of the Philippines, Tetangco said the low interest rate environment could still be retained. This is because of the favorable inflation outlook.


In the first seven months of the year, inflation averaged at 4.2 percent, well within the official target of between 3.5 and 5.5 percent.


According to the latest estimates of the BSP, inflation may average at 4 percent this year, 3.25 percent next year, and 2.97 percent in 2012.


In determining the inflation forecast for 2011 and 2012, the BSP factored in the possible increase in MRT and LRT fares, and a potential imposition of value-added tax on toll.


Given this inflation outlook, Tetangco said, the Philippine economy could afford to have low interest rates which, in turn, could sustain robust growth of the economy.



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