It took its first step to unwind easy monetary policies on Thursday when it raised the rate on a short-term lending facility.
'Implementing the exit strategy does not mean wholesale unwinding of all previous policy changes including rate reduction, RR (reserve requirement) reduction, and infusion of additional liquidity,' deputy central bank governor Diwa Guinigundo told reporters.
'They will be done in stages, driven by actual developments in the market, particularly inflation outlook, the balance of risks and durability of economic growth,' he said.
The central bank increased by 50 basis points the rate on its short-term peso rediscounting facility at a policy meeting on Thursday, joining the likes of the United States, Europe and China in withdrawing measures meant to protect their economies from the fallout of the global downturn.
But it kept its benchmark overnight borrowing rate at a record low of 4 percent for the fifth meeting in a row and signalled it was not in a hurry to raise interest rates with the local economic recovery yet to gain a solid footing.
The bank said it was reviewing all other non-rate measures taken to support the economy, including bank reserve requirements which were cut by 2 percentage points to 19 percent in November 2009.
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'Because of the concrete exit strategy to be implemented by the BSP (central bank), investors can be more confident that the ample liquidity we are seeing today in the market is not allowed to persist,' Guinigundo said, adding authorities want to abet higher commodity inflation and asset price inflation as investors search for higher yields.
The central bank raised its forecast for average inflation this year to 4.7 percent from 4 percent, still within Manila's 2010 official inflation goal of 3.5-5.5 percent.
(Reporting by Karen Lema; Editing by Rosemarie Francisco) ((If you have a query or comment on this story, send an email to firstname.lastname@example.org) Keywords: PHILIPPINES ECONOMY/POLICY (email@example.com; +632 841-8938; Reuters Messaging: firstname.lastname@example.org) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.