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Bangko Sentral Maintains Policy Rates (Layman's Version)

09.26.2002

The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), today decided to keep its overnight borrowing rate at a ten-year low of 7 percent and its overnight lending rate at 9.25 percent to help sustain a low-inflation economic growth. This is the seventh consecutive time that the Monetary Board has kept its policy rates unchanged since 15 March 2002.

A low-interest rate environment benefits the economy and the public, in general, as it encourages investments and promotes access to capital and goods at cheaper rates. While there are signs of modest improvements in the economy, as reflected by higher production and exports in the second quarter, there is still a need to stimulate further domestic economic activity. In particular, the latest economic and financial indicators show that demand for credit remains weak and spare capacity in the manufacturing sector is still large.

The Philippines has been enjoying record low interest and inflation rates for some time now. The inflation rate was 2.9 percent in August, well below the Government’s target of 4.5-5.5 percent for 2002. The inflation rate in August last year was 6.3 percent. For 2003, average inflation is expected to be within the 4.5-5.5 percent target for the year.

In deciding on policy rates (interest rates for the BSP’s borrowing and lending), the Monetary Board weighs carefully all factors that affect inflation and output growth in order to achieve its primary mandate of maintaining price stability that would support balanced and sustainable economic growth. The Monetary Board will meet again on 23 October to revisit the BSP’s policy interest rate settings.

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