Price Stability Needed in the Philippines

Philippine News Agency: The Bangko Sentral ng Pilipinas (BSP) has stressed the need to ensure price stability domestically amid the current global economic turbulence in a bid to guarantee the domestic economy’s stability.

BSP Governor Amando Tetangco Jr. said that this is the reason for their recent policy moves, which excludes touching the policy rates.

The central bank recently reduced by two percentage points to eight percent banks’ reserve requirement on bank deposits and deposit substitutes to address the increased risk aversion in the financial market as a result of the continued unfolding of the global financial meltdown.

This brings BSP’s 21 percent requirement of banks’ total capital to 19 percent since the 11 percent liquidity requirement was not touched.

Central bank has also opened a US dollar repurchase (repo) facility to address the seeming tightness on this liquidity and has enhanced its peso repo facility to ensure that liquidity requirements of banks will be addressed.

It has also doubled to P40 billion its budget for its peso rediscounting facility to address any liquidity augmentation need of financial institutions (FIs) in the country.

Monetary officials said these moves are “preemptive” and eyed to address any liquidity tightness in the system.

Tetangco said they have not touched the central bank’s policy rates since there are other channels that could be used to ensure the proper functioning of the domestic financial system.

Monetary officials expect the domestic economy to grow slowly this year and next year as a result of the global economic slowdown but stressed the need for strong fiscal policies to ensure that further stresses from the global crunch would be addressed.

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