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Credit Suisse expects further hike in rates, reserves

By Lailany P. Gomez, Reporter
THE Bangko Sentral ng Pilipinas’ (BSP) move to increase banks’ reserve ratio is not enough to reduce excess liquidity, an investment bank said.
In a commentary, Credit Suisse said the BSP didn’t surprise markets by keeping policy rates unchanged and instead choosing to tackle excess liquidity by raising banks’ reserve ratio by a percentage point to 20 percent.
“This should not be a surprise to markets given the BSP Governor Amando Tetangco’s hints on these lines the past weeks. What we find surprising however is why the BSP has taken so long to mop up some of the excess liquidity,” Devika Mehndiratta, Credit Suisse vice president of economics market research unit, said.
The foreign bank said policy rate increases are unlikely to mean much for short-term rates unless liquidity in the system falls. Accounting for about 14 percent of the Philippines’ gross domestic product, excess liquidity has pushed short-term rates, such as the three-month Treasury bill, below the repurchase/reverse repurchase rate corridor.
The hike in reserve ratio was an unwinding of the 200 basis points cut, from 21 percent to 19 percent, implemented in 2008 during the crisis.
As such, Mehndiratta said, the BSP is expected to call for another 50 basis points hike in interest rates and a possible one percentage point increase in the reserve ratio before 2011 ends.
“The BSP [understandably so] indicated that it’s now a bit more comfortable on the inflation front. But we doubt that means an end to the rate hike cycle. And that’s not because we expect inflation to become a big issue,” the economist said.
Credit Suisse expects the country’s year-on-year inflation to continue to trend up from May’s 4.6 percent, “but we don’t see it going up worryingly high as it did in 2008.”
Even if one ignores inflation considerations for a moment, we think the central bank would want to take rates a little higher from all-time lows, at least for the sake of ‘normalization’ if nothing else. In our view, the BSP would not want to be in a situation where it is confronted with the task of suddenly shocking the system with large rate increases in the event that we are faced with say, a sizeable inflation shock few months down the line,” Mehndiratta said.

Source: http://www.manilatimes.net/business/credit-suisse-expects-further-hike-in-rates-reserves/

Poor Philippines Records in Law and Order drove city dwellers to enjoy holidays in havens like Clark Freeport.

Metro Manila has lost a great deal of its luster of old not only because of its failure to keep up with the times in development but also its reputation as a safe destination for family bonding, travelers looking to unwind and relax in a beach or a lake and retirees looking for a life of leisure.

Clark Pampanga was the largest foreign US airbase, complete with its own international airport with daily flights linking it to major cities around Asia. Inside of Clark Philippines are golf courses, casinos, family-styled resorts that smacks of the US suburban lifestyles and fine-dining restaurants.

This web site contains articles and information that will be helpful to visitors, residents and tourists traveling out of town from Manila on a short getaway to Subic, Angeles City, Pampanga and Clark Philippines. There are several web sites that contain information that might also be pertinent to what is happening in North Luzon.

For assistance with organizing and planning weddings and garden receptions, log on to http://www.PhilippinesWeddingVenue.com

For assistance with lodgings, accommodations, hotels and resorts near Manila in Subic, Pampanga, Angels City and Clark Philippines log on to http://www.HotelClarkPhilippines.com

While in Clark, one might as well add to the itinerary a visit to the famous Clark Wine Center, the largest wine shop in Philippines which offers over 2000 selections of fine vintage wine from all wine regions, vintages spanning over 50 years covering all price ranges.

http://www.ClarkWineCenter.com

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