The Bangko Sentral ng Pilipinas dropped its overnight borrowing rate another 25 basis points to 4.00% from 4.25%. The Bank said: “The Monetary Board’s decision was based on its assessment that the inflation outlook remains within the target range, with well-anchored inflation expectations. Latest baseline forecasts have continued to indicate that inflation is likely to settle within the lower half of the 3-5 percent target range in 2012 and 2013. The risks to the inflation outlook also appear to be broadly balanced, with the subdued pace of global economic activity expected to temper the rise in commodity prices. Meanwhile, the upside risks to inflation stem mainly from volatility to oil prices due to geopolitical tensions in the Middle East and from the impact of strong capital inflows on domestic liquidity growth.”
The Philippine central bank also cut the interest rate by 25 basis points at its January meeting, and last raised its interest rate in May this year by 25 basis points to 4.50%, and increased reserve requirements by 100bps in July. The Philippines reported annual consumer price inflation of 3.9% in January, down from 4.8% in November, 5.2% in October, 4.8% in September, compared to 4.7% in August, 4% in July, 4.7% in June, 4.5% in May and 4.3% in April. Inflation is currently tracking just inside the Bank’s inflation target range of 3%-5%.