BANGKO Sentral ng Pilipinas plans a smooth implementation of the interest rate corridor toward the end of the second quarter this year, a high-ranking official said over the weekend.
“… The target implementation for the interest rate corridor system will be somewhere close to the end of the second quarter this year,” managing director Francisco Dakila Jr., of the monetary policy sub-sector, said in an interview.
“Later on we will make a detailed announcement on when will be the actual date that the corridor system will be online. But behind the scenes, there are a lot of preparations already being done,” Dakila said.
He said the Bangko Sentral had already conducted consultations with other parties on the various instruments that would be part of the corridor system. He said the implementation would be done with the least disruption to the system.
“The corridor system is going to be an operational change and do not involve a change in the stance of monetary policy.So there should be a smooth transition to the corridor system,” Dakila said.
Bangko Sentral deputy director Dennis Lapid said the regulator had conducted initial training for some of its counterparties as one way of familiarizing the key players on what to expect for the auctions.
“We are done with the consultations already. All we have to do now is the signing of agreements with major industries because it’s a bilateral contract essentially with the BSP and the banks and trust entities so we will ask them to sign to allow them to participate in the system,” Lapid said.
Lapid said the auctions would be done in Bangko Sentral. He said the regulator would coordinate with the Bureau of Treasury to avoid competition.
Both officials declined to give the exact date of the start of interest rate corridor implementation.
ING Bank senior economist Joey Cuyegkeng said in a report over the weekend the transition to interest rate corridor “will begin on May 4 with the closure of the one-month reverse repo and special deposit account windows and end on June 3 with the replacement of the RRP, repo and SDA windows by overnight deposit and lending facilities and a term deposit auction facility.”
Cuyegkeng said the overnight deposit and lending rates would define the corridor “whose width wasn’t disclosed.”
Cuyegkeng, however, said he did not expect the prevailing Bangko Sentral monetary bias to change together with the implementation of the corridor.
“We still expect BSP to hold policy settings steady in the near term. Bloomberg consensus shows a steady policy rate environment for 2016. This view gets support from the failed Doha meeting about freezing oil output,” he said.
The Monetary Board on March 23 kept the benchmark interest rates steady for the 12th consecutive time since October 2014 due to a low inflation environment.