The Monetary Board, the policy- making body of Bangko Sentral, kept its policy rates unchanged Thursday but raised its peso rediscount rate to 4 percent from 3.5 percent as it starts to unwind stimulus measures amid accelerating economic growth.
It also left interest rates on term repurchase papers and reverse RPs and special deposit accounts were also left unchanged.
“In its assessment of prevailing economic and financial conditions, the Monetary Board emphasized that the current monetary policy stance remains appropriate,” said central bank Gov. Amando Tetangco.
He said latest inflation forecasts remained within target.
Assistant Gov. Ma. Cyd Tuaño-Amador said the central bank revised the inflation forecast for 2010 to 4.7 percent from 4.0 percent.
Inflation hit an eight-month high of 4.4 percent in December and is seen to pick up further to a range of 4.5 percent to 5.4 percent in January, the central bank said.
The National Statistical Coordination Board reported that the country’s gross domestic product grew 1.8 percent in the fourth quarter and 0.9 percent in the whole of 2009.
“The domestic economy is expected to expand at a modest pace of 2.6 to 3.6 percent based on official forecasts, alongside the recovery in the global economy, which is being propped up in part by monetary and fiscal stimulus measures,” Tetangco said.
“The board noted that, with the favorable inflation outlook, keeping policy rates steady would continue to support economic activity,” he added.
The board set the peso rediscount rate equal to the overnight borrowing rate of 4 percent effective Feb. 1.
Tuaño-Amador noted that the board cut the peso rediscount rate by 50 basis points in March last year, as part of a package to liberalize banks’ access to the central bank’s rediscounting facility and ensure the orderly operation of domestic financial markets, in the event that the global financial conditions worsened. –Roderick T. dela Cruz with Bloomberg