The Bangko Sentral ng Pilipinas (BSP) will hold off on any adjustment of its overnight borrowing and lending rates following the uptick in the December 1999 inflation rate.
BSP Gov. Rafael B. Buenaventura said the December 1999 inflation level of 4.3 percent was not unexpected since December is traditionally the time of year when inflation moves up due to the holiday spending.
The full year 1999 inflation rate of 6.6 percent, Buenaventura noted, is still below the projected inflation level for the year.
For the month of January, Buenaventura admitted that the rate may continue to move up, especially if there is another oil price increase and prices of basic commodities go up.
Buenaventura said the BSP would carefully monitor the situation and refrain from making any adjustment that would aggravate liquidity.
However, he did not rule out the possibility that the Monetary board could also increase the overnight rate if there is a need to mop up excess liquidity.
The Estrada administration however, still wants to keep interest rates down to encourage more borrowings and, thus, fuel economic activity.
Buenaventura added that any adjustments at this time is “too early.” He also feels that there is no need yet to revise the inflation targets.
Finance Secretary Edgardo B. Espiritu earlier downplayed the possible increase in inflation for December and this month.
Espiritu noted that the December inflation rate is normally high and that the following month of January continues to experience a spillover effect.
Espiritu had also assured that even with the slight uptick in inflation, interest rates should not go up significantly.
In fact, Espiritu said he foresees the 91-day bellwether rate in Monday’s Treasury bill auction to drop anywhere from 15 to 25 basis points.
Thus, if the BSP signals no charge in its key policy rates the market may follow suit and keep their bids at the same level as those during the last auction of 1999. – Philippine Star, Marianne V. Go