This is an article from Manilatimes.net. Friday, 16 July, 2010. Please read...
BSP keeps key interest rates steady
By Lailany P. Gomez reporter
The Bangko Sentral ng Pilipinas (BSP) on Thursday announced it would shift to a medium-term inflation target, as it kept policy rates steady for the ninth time on the back of manageable price increases. In a press briefing, BSP Governor Amando Tetangco Jr. said the Monetary Board decided to keep the overnight borrowing or reverse repurchase (RRP) rate at four percent and the overnight lending or repurchase (RP) rate at six percent. The interest rates on term RRPs, RPs and special deposit accounts were also left unchanged.
Tetangco said the Board’s decision was based on its assessment that the current monetary settings continue to be appropriate, given the favorable inflation outlook and on-target inflation expectations.
“Recent surveys also show that inflation expectations remain firmly anchored within the inflation targets over the policy horizon,” he said.
Earlier, the BSP revised its inflation forecast this year to 4 percent from the original 4.7 percent, and for 2011 to 3 percent from 3.6 percent.
Tetangco however said the Board also noticed inflation pressures such as stronger-than-anticipated domestic economic activity and buoyant consumer and business sentiment.
“The BSP will continue to closely monitor emerging price pressures and coordinate as necessary with concerned government agencies on possible measures to address supply side concerns,” he said.
Other upside risks include rising liquidity and strengthening credit activity, recovering global commodity prices, power rate hikes and declines in agricultural output due to adverse weather conditions.
In a separate statement, the BSP announced the approval by the inter-agency Development and Budget Coordinating Committee of a medium-term inflation target to promote a long-term view on inflation and increase the predictability of monetary policy.
The central bank said it has shifted to a fixed inflation target of between 3 percent and 5 percent for 2012 to 2014 from a variable annual inflation target.
Deputy Governor Diwa Guinigundo said the fixed medium-term inflation target will also help anchor inflation expectations and support consumption and investment by fostering greater predictability in economic decisions.
“This target is appropriate given the consistency of the latest inflation forecasts with the desired inflation path, the private sector’s inflation expectations and growth prospects of the economy,” he said.
“This is something that the BSP decided for itself. This will also help the market better appreciate the formulation of monetary policy. Businessmen can plan ahead or can assess,” he added.
The BSP however would continually review its medium-term target to align it with the latest macroeconomic conditions.
More companies borrowing in 2H
Adelbert Legasto, Bank of the Philippine Islands (BPI) executive vice president and asset management head, said more companies would likely borrow in the second half of the year following the BSP move to hold onto existing interest rates.
“Borrowing may start to move up as far as the companies are concerned because borrowing at lower interest rates makes them decide to do investments in business that can give them better yields than the borrowing rate,” Legasto said.
He said second-half borrowings however would be lower than in the first six months of the year, as the majority of big companies already finished their fund-raising activity.
“In terms of number, there’ll be more activity in the small- and middle-market level,” he said.
The executive said equities would outperform bonds this year because the former would have a bit more upside, as stocks have yet to return to pre-crisis price levels.
“Bonds will be more to address your fixed-income requirement, which is more conservative so you don’t look at very high returns in bonds compared to equity,” he said.
In this regard, ALFM, a mutual fund that BPI manages, is placing its bets on the power and real estate sectors to lead trades in the second half.
“Part of it will be because of the real estate investment trust and there’s a lot of activity going around, all the buying and selling. Since interest rates are down, people will have more money to buy properties,” Legasto said.
BPI manages the ALFM Family of Funds, which had P470 billion in assets. ALFM is comprised of ALFM Peso Bond Fund, ALFM Dollar Bond Fund, ALFM Euro Bond Fund, ALFM Growth Fund, Philippine Stock Index Fund and ALFM Money Market Fund.
This year, ALFM sees a 14-percent growth in its aggregate net asset value despite concerns over the global economy.
“We are still on track as far as achieving those projections are concerned,” said Legasto.
In 2009, ALFM grabbed 45 percent of the P68.7 billion mutual fund industry followed by Philamlife with a 23 percent share and Sun Life at 22 percent.
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BSP keeps key interest rates steady
By Lailany P. Gomez reporter
The Bangko Sentral ng Pilipinas (BSP) on Thursday announced it would shift to a medium-term inflation target, as it kept policy rates steady for the ninth time on the back of manageable price increases. In a press briefing, BSP Governor Amando Tetangco Jr. said the Monetary Board decided to keep the overnight borrowing or reverse repurchase (RRP) rate at four percent and the overnight lending or repurchase (RP) rate at six percent. The interest rates on term RRPs, RPs and special deposit accounts were also left unchanged.
Tetangco said the Board’s decision was based on its assessment that the current monetary settings continue to be appropriate, given the favorable inflation outlook and on-target inflation expectations.
“Recent surveys also show that inflation expectations remain firmly anchored within the inflation targets over the policy horizon,” he said.
Earlier, the BSP revised its inflation forecast this year to 4 percent from the original 4.7 percent, and for 2011 to 3 percent from 3.6 percent.
Tetangco however said the Board also noticed inflation pressures such as stronger-than-anticipated domestic economic activity and buoyant consumer and business sentiment.
“The BSP will continue to closely monitor emerging price pressures and coordinate as necessary with concerned government agencies on possible measures to address supply side concerns,” he said.
Other upside risks include rising liquidity and strengthening credit activity, recovering global commodity prices, power rate hikes and declines in agricultural output due to adverse weather conditions.
In a separate statement, the BSP announced the approval by the inter-agency Development and Budget Coordinating Committee of a medium-term inflation target to promote a long-term view on inflation and increase the predictability of monetary policy.
The central bank said it has shifted to a fixed inflation target of between 3 percent and 5 percent for 2012 to 2014 from a variable annual inflation target.
Deputy Governor Diwa Guinigundo said the fixed medium-term inflation target will also help anchor inflation expectations and support consumption and investment by fostering greater predictability in economic decisions.
“This target is appropriate given the consistency of the latest inflation forecasts with the desired inflation path, the private sector’s inflation expectations and growth prospects of the economy,” he said.
“This is something that the BSP decided for itself. This will also help the market better appreciate the formulation of monetary policy. Businessmen can plan ahead or can assess,” he added.
The BSP however would continually review its medium-term target to align it with the latest macroeconomic conditions.
More companies borrowing in 2H
Adelbert Legasto, Bank of the Philippine Islands (BPI) executive vice president and asset management head, said more companies would likely borrow in the second half of the year following the BSP move to hold onto existing interest rates.
“Borrowing may start to move up as far as the companies are concerned because borrowing at lower interest rates makes them decide to do investments in business that can give them better yields than the borrowing rate,” Legasto said.
He said second-half borrowings however would be lower than in the first six months of the year, as the majority of big companies already finished their fund-raising activity.
“In terms of number, there’ll be more activity in the small- and middle-market level,” he said.
The executive said equities would outperform bonds this year because the former would have a bit more upside, as stocks have yet to return to pre-crisis price levels.
“Bonds will be more to address your fixed-income requirement, which is more conservative so you don’t look at very high returns in bonds compared to equity,” he said.
In this regard, ALFM, a mutual fund that BPI manages, is placing its bets on the power and real estate sectors to lead trades in the second half.
“Part of it will be because of the real estate investment trust and there’s a lot of activity going around, all the buying and selling. Since interest rates are down, people will have more money to buy properties,” Legasto said.
BPI manages the ALFM Family of Funds, which had P470 billion in assets. ALFM is comprised of ALFM Peso Bond Fund, ALFM Dollar Bond Fund, ALFM Euro Bond Fund, ALFM Growth Fund, Philippine Stock Index Fund and ALFM Money Market Fund.
This year, ALFM sees a 14-percent growth in its aggregate net asset value despite concerns over the global economy.
“We are still on track as far as achieving those projections are concerned,” said Legasto.
In 2009, ALFM grabbed 45 percent of the P68.7 billion mutual fund industry followed by Philamlife with a 23 percent share and Sun Life at 22 percent.
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