TEXT-Philippine central bank monetary policy statement

MANILA, April 22 (Reuters) - The Philippine central bank (BSP) on Thursday kept its overnight borrowing rate at 4 percent, as expected, but further reduced a short-term lending scheme as it gradually withdraws stimulus measures introduced during the global financial crisis.

Following is the text of the statement by Governor Amando Tetangco.



MONETARY BOARD KEEPS POLICY RATES STEADY, CALIBRATES EXIT PROCESS

The Monetary Board decision was based on the latest BSP baseline projections, which show that while inflation forecasts have somewhat risen, the inflation path remains within the target for 2010 and 2011. The board noted that the second-round effects of supply-side pressures, notably from higher energy prices, are manageable at the moment, and inflation expectations are well-contained. In addition, while the global recovery is proceeding faster than expected, world economic activity remains dependent on macroeconomic stimulus policies, and therefore, the self-sustaining nature of the global expansion remains to be seen. Current policy settings therefore remain appropriate.

The Monetary Board also noted that the BSP's disengagement from crisis intervention measures should continue as economic conditions steadily show signs of improvement and as financial markets have remained stable. In the light of favourable credit and liquidity conditions, and to reduce potential inflationary risks, the Monetary Board decided to further reduce the peso rediscounting budget from 40 billion pesos to the pre-crisis level of 20 billion pesos, effective on May 3.

At the same time, the Monetary Board observed that the balance of risks to future inflation is tilted to the upside because of supply-side factors. With growth expected to improve over the policy horizon and inflows from abroad anticipated to strengthen, monetary authorities resolve to remain vigilant against inflation pressures and are prepared to take timely and preemptive monetary policy actions to safeguard price stability. (Compiled by Manny Mogato)

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