Philippine monetary board cuts rates by anew, defends governor

In another aggressive move, the Philippine monetary board lowered key interest rates by another 50 basis points even as Bangko Sentral (central bank) defended its governorÆs right to the post.

The rate cuts will be effective from Monday, 12 February. This recent action brings the cumulative reduction to 400 points since 4 December 2000, wiping out all the rate increases since 13 October, when the peso tumbled at intensifying news of Estrada’s alleged involvement in gambling and corruption.

After the cut, the overnight RRP (reverse repo) rate will be 11.0% while the RP (repurchase) rate will be 13.25%. This is the fifth rate cut for the year.

The tier system for overnight placement by banks under the RRP window will be maintained. For placements up to Ps5 billion ($104 million), the rate will be 11.0%, for the next Ps5 billion it will be 9.5%, and for placements over Ps10 billion, it will be 8.0%.

The Monetary Board is the highest monetary policy-making body in the Philippines, chaired by the governor of the Bangko Sentral ng Pilipinas. While the country changed presidents on 20 January, Rafael Buenaventura remains the central bank governor because his term is fixed by law until July 2005.

However, some congressmen have questioned his tenure because he was not confirmed by the Commission on Appointments upon assuming office in July 1999. On Friday, the legal counsel of the central bank said that according to law and jurisprudence, the appointment of Buenaventura, like the appointment of his predecessor Govenor Gabriel Singson, did not need the confirmation of the appointment commission.

(Editors note: Governor Gabby Singson, the central bank governor, should not be confused with Governor Chavit Singson, the Ilocos Sur provincial governor whose expose eventually led to President Estrada’s impeachment. The trial was cut short when the people rallied and ousted Estrada on 20 January following a move by pro-Estrada senators to suppress evidence.)

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