The Bangko Sentral ng Pilipinas is likely to maintain its policy rates at their current levels while it holds the tiered rates on bank deposits.

BSP deputy governor Diwa Guinigundo said doing away with tiering scheme will have the effect of monetary tightening.

But with the benign inflation outlook for this year and the next, Guinigundo said such a move is not warranted.

"If you remove it, it will not be consistent with the monetary condition if you don’t do anything else," Guinigundo said.

Analysts are expecting the BSP to either consider gradually or abruptly lift the tiering scheme beginning this quarter.

A gradual phase-out will remove the tiered rates from certain deposit products then to the overnight placements.

Analysts said an outright restoration of the overnight rate will be accompanied by a balancing policy move, in this case a cut in the policy rates.

But with the lingering domestic liquidity expansion, Guinigundo said a rate cut is not an option.

"Tightening is warranted by M3 growth but we have already implemented measures to liberalize foreign-exchange flows and allowed pension funds and trust departments to deposit with the BSP," Guinigundo said.

The tiering scheme, imposed in November, has helped support credit expansion, Guinigundo said.

Bank lending grew at faster pace at 9.9 percent in March from a month earlier, sustaining the high single-digit growth seen since September.

"We’ll continue to monitor and make judgment whether it’s time to review the tiering scheme," Guinigundo said.

Frederic Neumann, economist of Hong Kong and Shanghai Banking Corp, said in a recent note monetary authorities may consider withdrawing the scheme "only in about three months’ time."

The single-digit growth in loans is "insufficient" to prod authorities to remove the scheme, he said.

"Authorities are likely to allow some time for an assessment of the effect of the expansion of the SDA access," Nuemann said.

The BSP’s overnight borrowing and lending rates were unchanged at 7.5 percent and 9.25 percent at the monetary board’s April 19 meeting.

The board meets for policy decision on May 31.

Inflation rose slightly to 2.3 percent in April from 2.2 percent in March, bringing the rate to 2.8 percent in the first four months.