Posted on June 5, 2012

May inflation lower at 2.9 percent

A June 5, 2012 press release from the Bangko Sentral ng Pilipinas

Year-on-year headline inflation decelerated slightly to 2.9 percent in May
from three percent in April, well within the forecast of Bangko Sentral ng
Pilipinas (BSP) of 2.53.4 percent for the month. This brought the year-todate (YTD) average inflation to 3.0 percent, which is at the low end of the
Governments inflation target range of 35 percent for 2012. Meanwhile,
core inflation, which excludes certain food and energy items to measure
generalized price pressures, rose slightly to 3.7 percent in May from 3.6
percent in April. Core inflation averaged 3.5 percent for the first five months
of the year.
The slightly lower May headline inflation was due largely to slower
increases in the prices of non-food items, particularly housing, water,
electricity, gas, and other fuels, and transport. Lower charges for household
electricity rates and downward price adjustments for LPG, kerosene,
gasoline, and diesel pushed down nonfood inflation. Meanwhile, food
inflation held steady as price increases in rice and sugar were offset by
lower prices of fish, vegetables, fruits, oils and fat, and meat.
Governor Amando M. Tetangco Jr. noted that the lower inflation reading in
May is consistent with the BSPs assessment of a manageable inflation
outlook over the policy horizon, with average inflation likely to settle well
within the 3-5 percent target range. He assured that the BSP will continue
to closely monitor price and output developments to ensure that monetary
policy settings remain consistent with the price stability objective while
being supportive of balanced and sustainable growth.

BSP: April inflation decelerates to 2.6

Posted on May 7, 2013

A May 7, 2013, press release from the Bangko Sentral ng

Pilipinas
Headline inflation slowed down further to 2.6 percent year-onyear in April from 3.2 percent in March, and was within the BSPs
forecast of 2.2-3.1 percent for the month. This brought the yearto-date average inflation rate to 3.0 percent, which is at the low
end of the Governments inflation target range of 4.0 percent
1.0 percent for 2013. Likewise, core inflation, which excludes
certain food and energy items to measure generalized price
pressures, decelerated to 3.1 percent in April from 3.8 percent in
the previous month. Meanwhile, month-on-month headline
inflation increased slightly to 0.2 percent from 0.1 percent in
March.
The continued deceleration of headline inflation in April was
traced mainly to the slower price increases for non-food items.
This was due, in turn, to reductions in the prices of domestic
petroleum products. Similarly, food inflation eased as most food
commodities, particularly fish, oils, and sugar, posted lower price
increases due to adequate domestic supply.

Governor Amando M. Tetangco Jr. said that the latest inflation

data continue to be in line with the BSPs assessment of a
manageable inflation environment over the policy horizon, with
average inflation expected to settle within the lower half of the
4.0 percent 1.0 percent target range based on latest forecasts.
Going forward, the BSP will continue to monitor emerging
developments on both the domestic and global fronts to ensure
that monetary policy settings remain consistent with the price
stability objective while being supportive of non-inflationary
growth.
bsp.gov.ph

Credit rating upgrade a boon for bank capital and

lending
Posted on July 4, 2013

From the Bangko Sentral ng Pilipinas

The Bangko Sentral ng Pilipinas (BSP) announced a reduction in
the risk weights of Philippine sovereign issues denominated in
foreign currencies. This reduction is a direct result of the credit
rating upgrade of the Philippines into investment grade by two
international rating agencies.
As part of its overall risk management framework, the BSP
conservatively raised in July 2007 the risk weights of sovereign
issues denominated in foreign currencies. Under the same
guidelines, the recent investment grade ratings from Fitch and
Standard and Poors respectively recognize the stronger risk
standing of the Republic of the Philippines. This then allows for
the reduction in risk weights.
The reduced risk weights cover two risk categories.
Credit risk weights for foreign currency denominated sovereign
issues are reduced from 100 percent to 50 percent. On the other

hand, the capital charge for interest rate risks on bank holdings of
foreign currency bonds issued by the Philippine government and
the BSP is reduced from eight percent to a range of 0.25 to 1.60
percent of these assets, depending on the residual maturity of the
debt securities or derivative contract.
Governor Amando M. Tetangco Jr. points out that these are the
direct gains that accrue with the investment-grade rating. He
highlighted, however, that the impact is not only about the feelgood effects of a lower risk weight but that there are balance
sheet implications to consider as well.
The lower risk weights assets have the effect of making available
more funds that may be potentially used for lending and other
banking activities. The BSP simulations indicate that about
P147.13 billion may effectively be released for loans and other
expenses as a result of the upgrade to investment grade.
The same BSP simulations show that the calibrated risk weights
will raise the capital adequacy ratio (CAR) of universal and
commercial banks (U/KBs) from 17.28 percent to 17.83 percent
using end-2012 banking figures.
The BSP points out that the simulated effects are not insignificant.
However, the BSP also reminds banks that credit-underwriting
standards need to be sustained if we are to sustain the benefit of
such ratings upgrade.
bsp.gov.ph