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Philippines Isn’t Ruling Out Another Rate Cut, Tetangco Says

February 01, 2012

(Updates with comment from analyst in fourth paragraph.)

Feb. 1 (Bloomberg) -- The Philippine central bank isn’t ruling out another interest-rate cut this quarter, Governor Amando Tetangco said after a report this week showed economic growth slowed in 2011.

“Considering the conditions today, we are not ruling out another adjustment within the quarter,” Tetangco said in an interview in Manila today. “Being accommodative of growth at this time would not threaten our inflation target,” he said in a speech to the Fund Managers Association of the Philippines.

Bangko Sentral ng Pilipinas lowered the rate it pays lenders for overnight deposits by a quarter of a percentage point to 4.25 percent on Jan. 19, its first cut since July 2009, joining emerging markets from Thailand to Indonesia in easing policy as a deteriorating global economy threatens growth. President Benigno Aquino plans to increase spending to a record this year to boost expansion.

“The very early cut in January was an insurance,” BDO Unibank Inc. market strategist Jonathan Ravelas said in a telephone interview today. “A second cut this quarter means there’s a real need to aid the slowing economy.”

Global uncertainties have lessened the pressure on inflation, which gives the central bank the flexibility to lower rates, he said.

‘Enough Liquidity’

The central bank kept the reserve requirement ratio at 21 percent of lenders’ deposits at its last meeting, and Tetangco signaled that the monetary authority won’t use the cash ratio as a tool to lower borrowing costs for now.

“We have more than enough liquidity,” Tetangco said when asked whether he will cut the ratio. The central bank will change reserve requirement rules this month, a move seen to achieve a neutral effect, he said. The next policy meeting is scheduled for March 1.

The central bank is monitoring capital flows and is aware that inflows may reverse, the governor said.

“We have an enhanced toolkit to ensure large swings in the exchange rate are avoided,” Tetangco said.

The Philippine economy expanded 3.7 percent in 2011, compared with a revised 7.6 percent expansion a year earlier and a government target of at least 4.5 percent, a report showed on Jan. 30.

--With assistance from Cecilia Yap and Clarissa Batino in Manila. Editors: Stephanie Phang, Shamim Adam

To contact the reporters on this story: Norman P. Aquino in Manila at; Max Estayo in Manila at

To contact the editor responsible for this story: Stephanie Phang at

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