The Philippine central bank lowered its policy interest rates by a quarter point as benign inflation helped policymakers to initiate a second easing this year and to support economic activity and reinforce confidence.
Bangko Sentral ng Pilipinas decided to reduce the overnight borrowing or reverse repurchase rate to 4 percent and the overnight lending or repurchase rate to 6 percent, effective immediately. The decision was widely expected.
The latest cut follows a 25-basis-point reduction in January this year, which was the first lowering since July 2009. The Monetary Board said the benign inflation outlook allowed further scope for a measured reduction in policy rates to underpin economic growth.
Inflation is likely to remain within the lower half of the 3-5 percent target range this year and 2013, the bank said. Moreover, the risks to the inflation outlook is seen to be broadly balanced, with the subdued pace of global economic activity expected to temper the rise in commodity prices.
Reflecting mainly the impact of weaker external demand, domestic demand continued to grow only marginally. Global economic conditions are expected to stay subdued as fiscal and banking sector headwinds in advanced economies affect global growth.
The Philippine economy expanded 3.7 percent year-on-year in the fourth quarter as the pick up in government spending in the last quarter and the resilience of the services sector helped cushion the impact of the slowdown in the Eurozone.
The central bank said it will continue to monitor emerging demand and price developments to ensure that monetary policy settings remain consistent with price stability while being supportive of non-inflationary economic growth.
by RTT Staff Writer
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