REFILE-Manila central bank: will hike rates if needed to prevent asset bubbles
(Refiles correcting typo in bullets)
* Central banker sees no real estate asset bubble
* Higher food, oil prices putting pressure to raise rates
* Strong growth in the property loans market
By Siegfrid Alegado
CEBU CITY, April 25 (Reuters) - The Philippine central bank is monitoring possible asset bubbles and stands ready to adjust prudential and monetary policies, including raising interest rates, if warranted, a senior bank official said on Friday.
There are currently no signs of an asset bubble in the real estate market, said Diwa Guinigundo, deputy governor of the Bangko Sentral ng Pilipinas (BSP).
There are continuing upside risks to the inflation outlook from higher food and oil prices and strong liquidity growth, he said, reiterating that the leeway for keeping policy rates steady at a record low of 3.5 percent was narrowing.
"Real estate credit to GDP ratio, I think, should bear close watching. The BSP is doing that," he told a media forum in the central Philippine city of Cebu.
"If the numbers suggest that further monetary policy action is necessary, we will not hesitate and we will adjust accordingly whether it's policy rate, the SDA (special deposit account) rate (or) macroprudential" measures, he said.
"If more and more investments are going to the real estate sector, then it is necessary that macroprudential measures have to be put in place," Guinigundo said, adding one possible measure was to bring down the ceiling of banks' real estate exposure.
GROWTH IN PROPERTY LOAN MARKET
The central bank has been studying several measures to prevent asset bubbles in the property market, after it tightened monitoring of banks' real estate lending.
In 2012, it widened the definition of banks' property-linked lending activities to include debt and equity investments in real estate, and asked banks to submit more information on such lending and investments.
"While today there is no evidence that there is an over-stretching of asset prices as far as the real estate sector is concerned, if you will have 20, 29, 30 percent growth of real estate sector, it will also come to a point when it becomes risky," Guinigundo said.
"If you continue to put air in the balloon ... it will burst."
Rising consumer spending is supporting strong growth in the property market. Loans to the property market in the year to February averaged around 22 percent growth, according to latest data from the BSP.
Last month, the central bank left its policy rate untouched, but raised banks' reserve requirement by 1 percentage point to 19 percent to mop up excess liquidity following a record money supply growth in January.
Guinigundo said money supply growth is expected to slow down to 17 percent towards the middle of the year from a record high of around 37 percent in January as the central bank's recent policy measures, including tweaking the rate and availability of the short-term SDA facility, take root.
The central bank next meets to review policy on May 8. (Writing by Rosemarie Francisco; Editing by Tom Heneghan)