BSP: Deposit rates up with key rate hikes


THE successive key policy rate hikes have already passed through to deposits of Filipino account holders, the Bangko Sentral ng Pilipinas (BSP) disclosed.

Data shared in a recent briefing from BSP Deputy Governor Francisco Dakila Jr. showed interest rates for short-term deposits have increased by 310 basis points (bps).

The average interest rate for short-term deposits has reached 3.68 percent in 2023. The same deposits carried an interest rate of 0.58 percent in May 2022.

Dakila also said for long-term deposits, interest rates averaged 3.01 percent in May 2022, and this has since increased to 5.14 percent in 2023. This is a 212.4-bps increase.

BSP Governor Felipe M. Medalla said, however, that the pass-through of the rate hikes have a better chance of seeing an impact if the deposits are higher.

However, Medalla said, choosing which bank to place deposits in is not solely based on interest rates, but other factors such as branch location and the amount of deposits.

“If your deposit is P100,000, you’re unlikely to move to a bank that’s farther away. That’s the nature of the business,” Medalla said.

Last week, the Monetary Board raised the BSP’s overnight reverse repurchase facility by 25 bps to 6.25 percent, effective Friday, March 24, 2023. The BSP said with this, the interest rates on the overnight deposit and lending facilities will be set to 5.75 percent and 6.75 percent, respectively.

Medalla said while the US Federal Reserve also decided to raise interest rates by 25 bps on Wednesday, this did not factor in the decision of the MB.

He added that in the future, the BSP may no longer track the US Federal Reserve’s movements. Medalla said if the Federal Open Market Committee (FOMC) decides to pause on rate hikes, the BSP may not be keen on doing the same based solely on the movement of the US monetary authorities.

Medalla said future actions by the Monetary Board will be “data-dependent.” He noted that while the recent headline inflation showed prices slowing, considering the seasonality of prices would show that inflation continued to increase.

Image credits: Nonie Reyes