BSP sees no emergency rate meet

Jan	07
2009

Reuters | 10/13/2008 10:51 AM

Printer-friendly version | Send to friend

Bangko Sentral ng Pilipinas (BSP) is unlikely to hold an emergency policy meeting and follow the lead of big economies that joined a coordinated worldwide wave of rate cuts last week aimed to quell market panic, a senior central bank official said.

"Right now I see no move to, other than the next cycle. Our review is every six weeks," Nestor Espenilla, deputy central bank governor and acting governor told reporters over the weekend.

"Our situation is different from the situation of those (central) banks. What our board reviews primarily is our inflation target. Our board see no reason to adjust the target," he said.

The central bank's next rate-setting meeting is on Nov. 20.

The Philippine central bank held rates steady on Oct. 6, two days before the U.S. Federal Reserve led an unprecedented joint action with China, the European Central Bank, and central banks in Britain, Canada, Sweden and Switzerland to cut policy rates in a bid to calm global markets fearing a global recession.

In Asia, South Korea, India, Taiwan and Hong Kong also followed with key rate cuts while Singapore eased its monetary policy for the first time in five years.

"It's never been done before," Espenilla said when asked about a possible emergency meeting outside of the six-week policy review time frame."

He said the policy making Monetary Board was aware of the current "extraordinary times" when it decided to skip a rate hike for the first time in four meetings earlier this month.

"We're looking at developments," Espenilla added.

The coordinated rate cuts and the $700-billion financial bailout package passed by the U.S. Congress a week ago failed to soothe investors' nerves and credit markets remained jammed.

The Philippines has raised its policy rates by a total 100 basis points in three meetings in a row to rein in red-hot inflation, but slowing price pressures allowed it to hold rates steady at its last meeting.

When asked if Philippine banks should cut their lending activities, Espenilla said: "Clearly, we can see a greater degree of consciousness. It's just probably a rational thing to do during this kind of situation," he said.

Most banks have adopted a wait-and-see attitude in response to the volatile markets, choosing to stay liquid and tightening lending activities.

"Right now, most financial institutions are guarding their liquidity. That's what I mean by cautiousness. So may be lending will not be as strong," Espenilla said.