BSP likely to keep overnight borrowing rate on hold today

The International Monetary Fund maintained its projections for the Philippines economic growth at 6% for 2016 and 6.2% in 2017 in May as compared to growth of 5.8% in 2015. The country does not greatly depend on exports.

At today’s monetary policy meeting, the Philippines’ central bank is expected to keep the overnight borrowing rate unchanged at 4% and the special deposit account (SDA) at 2.5%, said Scotiabank in a research note. The Philippines economy has a strong domestic demand and a benign inflation outlook.

On 3 June, the BSP will apply an interest rate corridor to improve the monetary policy’s effectiveness. At present, the overnight lending rate is at 6%. The overnight lending rate will be t he ceiling of the interest rate corridor, whereas the SDA rate will serve as the floor.

The overnight borrowing rate, which is at 4%, will continue to be the benchmark policy rate. Earlier, the BSP Deputy Governor Diwa Guinigundo mentioned that there is a possibility of a one-time adjustment in policy rates to narrow interest rate corridor’s current width of 350bp.