The Bangko Sentral ng Pilipinas held its overnight borrowing rate unchanged at 4.50% and the overnight lending rate at 6.50%, and increased the reserve requirement 100bps to 21% effective 5 August 2011. The Bank said: “bank lending has been growing at double-digit rates since January 2011, supported by the strong momentum of domestic economic activity and stable financial conditions… The Monetary Board is of the view that sustained foreign exchange inflows, driven by upbeat market sentiment over the brighter prospects for the Philippine economy, could fuel a further acceleration of domestic liquidity growth which could pose risks to future inflation.”
The Philippine central bank last raised its interest rate in May this year by 25 basis points to 4.50%. The Philippines reported annual consumer price inflation of 4.6% in June, up from 4.5% in May and 4.3% in April, while core inflation was measured as 4% compared to 3.7% in May. Inflation is currently tracking inside the Bank’s inflation target range of 3%-5%. The Bank also increased the required reserve ratio during its June meeting; the latest increase is estimated to remove around P30 billion of liquidity from the system.