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Guinigundo defends BSP action

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo strongly defended the Monetary Board’s latest decision to keep the current policy settings unchanged, despite the low inflation environment.

“What for? To raise liquidity?” Guinigundo asked, referring to suggestions by several analysts that the time was ripe for monetary authorities to tweak the current policy stance, after inflation rate fell below 1 percent in July and averaged 1.9 percent in the first seven months, below the lower end of the target range of 2 percent to 4 percent for 2015.

Guinigundo said liquidity or money supply in the financial system was actually growing and was enough to support demand.  “With domestic liquidity and credit still growing, we don’t see the urgency to adjust the current monetary policy settings,” he said.

Latest data from Bangko Sentral showed that domestic liquidity grew 9 percent year-on-year in June 2015 to reach P7.7 trillion. This was, however, slightly slower than the 9.3-percent expansion recorded in May.

The Monetary Board on Thursday kept the benchmark interest rates steady for the seventh time since October last year on manageable inflation environment.

Bank of the Philippine Islands lead economist Emilio Neri Jr. earlier said monetary authorities should consider reducing the reserve requirement ratios of banks from the current 20 percent---the highest in the region—because average inflation might be at risk of falling below 2 percent.

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