Philippine Bank Chief Sees Easing by End March
Bangko Sentral ng Pilipinas Governor Amando Tetangco
Veejay Villafranca/Bloomberg
Amando Tetangco, governor of Bangko Sentral ng Pilipinas.
Amando Tetangco, governor of Bangko Sentral ng Pilipinas. Photographer: Veejay Villafranca/Bloomberg
Bangko Sentral ng Pilipinas Governor Amando Tetangco
Veejay Villafranca/Bloomberg
Amando Tetangco, governor of Bangko Sentral ng Pilipinas.
Amando Tetangco, governor of Bangko Sentral ng Pilipinas. Photographer: Veejay Villafranca/Bloomberg
The Philippine central bank chief said he anticipates easing monetary policy this quarter should Europe’s sovereign-debt crisis further damp the growth outlook, prompting stocks to climb as bonds erased losses.
“Given benign inflation conditions and a favorable inflation outlook, we have room to support domestic activity should the global economy deteriorate significantly,” Governor Amando Tetangco said in an interview in Manila today, ahead of a policy meeting this month. “The Bangko Sentral ng Pilipinas is prepared to employ policy tools as may be appropriate to boost domestic economic growth as long as current readings on price and financial stability will allow.”
Philippine inflation (PHC2II) at an 11-month low has widened the scope for Tetangco to join counterparts in Indonesia, Thailand, and Australia in cutting interest rates to protect growth. Bangko Sentral held off from lowering borrowing costs last year as Asia-Pacific policy makers juggled the need to guard against price pressures with containing the threat to their economies from faltering global demand.
“In a world where exports are going be soft in the first half of the year, it makes sense for the central bank to lower interest rates to boost private investment, consumption,” said Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co. “Inflation looks pretty subdued at this point and a rate cut can come as early as this month.”
Bonds Recover
A report tomorrow may show Philippine exports fell for a seventh month in November, all nine economists predict in a Bloomberg News survey.
Benchmark bonds due January 2022 erased losses after the report. The yield was unchanged at 5.2 percent, according to 3:17 p.m. prices at Amstel Financial Services, after rising 0.05 percentage point earlier. The Philippine Stock Exchange Index (PCOMP) surged to a five-month high, climbing 1.3 percent at the close of trading today. The gauge rose 29.28 points in the last 10 minutes of trading, according to data compiled by Bloomberg.
Bangko Sentral kept its benchmark interest rate (PPCBON) unchanged at 4.5 percent for a fifth meeting in December after two increases earlier in 2011. It also raised the reserve requirement twice, bringing the ratio to 21 percent. Policy makers next meet to decide on borrowing costs on Jan. 19 and March 1.
The monetary authority may cut its benchmark policy rate or reduce banks’ reserve ratio as it forecasts inflation this year and next will average closer to the low-end of a 3 percent to 5 percent target, Tetangco said today.
Keeping Low Rates
“With this inflation outlook, one can expect the low interest-rate environment to continue,” he said. “As a result of that, we should also expect an increase in investment that would support growth.”
Inflation eased to 4.2 percent in December, a report showed last week. Money supply growth (PHMS3YO) slowed to a three-year low of 6.9 percent in October, the latest data show.
Philippine President Benigno Aquino is increasing spending this year to a record 1.83 trillion pesos ($41 billion) by building roads, bridges and schools as he seeks to bolster growth to as much as 8 percent annually. The government also plans to offer as many as 16 projects to investors this year, compared to one contract awarded in 2011.
Bidding for Projects
“You have a good combination of an accommodative monetary policy courtesy of a favorable inflation outlook and expectations, and expansionary fiscal policy,” Tetangco said.
Ayala Corp., leading a consortium that won a contract last month to build a four-kilometer, four-lane paved toll road leading to provinces south of the capital, may bid for two road projects and a contract to run an airport, Managing Director Eric Francia said Dec. 15.
Aquino has won sovereign-rating upgrades from Fitch Ratings and Moody’s Investors Service after intensifying efforts to narrow the budget gap from a record 314 billion pesos in 2010, and Standard & Poor’s raised its outlook on the country’s debt rating last month.
The Philippines’ $200 billion economy expanded 3.2 percent in the third quarter from a year earlier, holding near the 3.1 percent pace in the previous three months that was the slowest since 2009.
To contact the reporters on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
To contact the editor responsible for this story: Stephanie Phang in Singapore at sphang@bloomberg.net
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