Low interest rates to prevail until mid-2010

MANILA, Philippines–The Bangko Sentral ng Pilipinas will likely keep its policy rates at current record lows until the middle of 2010 to further boost the economy, which is seen to recover only modestly from the impact of the global economic crunch.

This was the projection of investment bank Barclays Capital, which said the BSP would want to witness faster credit growth to support more economic activity.

Prakriti Sofat, regional economist of Barclays Capital, said in an analysis of the Philippine economy that the BSP may allow the peso to strengthen a bit to help maintain a benign inflation.

“From a policy perspective, we think that the central bank will lean toward using the currency as an instrument to contain inflation, with our yearend target being 46 [$1:P46],” the bank economist said.

After hovering in the 47-to-a-dollar territory earlier in the year, the peso has moved to the 46 range and touched 45 in intra-day trade last Tuesday because of rising foreign exchange inflows, mainly remittances from Filipinos abroad.

An appreciation of the peso makes imported goods cheaper, thereby tempering overall inflation. –Michelle Remo, Philippine Daily Inquirer