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Central bank says policy could stay steady till yearend




Posted on October 30, 2014


THE BANGKO SENTRAL ng Pilipinas (BSP) can be expected to keep monetary policy steady in its final meeting next month should price hikes ease further, as expected, and the United States Federal Reserve take its time in raising interest rates, Governor Amando M. Tetangco, Jr. said yesterday.

BSP Governor Amando M. Tetangco, Jr. wants to bide his time on policy moves. -- BW File Photo
“If the inflation situation and the inflation forecast remain favorable and manageable and all the relevant factors are in place -- like there are no second-round effects and no financial stability issues -- then I think the market can expect the BSP to maintain the current stance of monetary policy,” Mr. Tetangco said in a forum in Makati City that was organized by the Foreign Correspondents Association of the Philippines.

“We need to always be vigilant. We need to always monitor developments and make regular assessments of the situation and see if there is a need to modify the stance of monetary policy,” he added.

Mr. Tetangco’s statement came a day after he said inflation in October is expected to have further eased to around 3.7-4.6% from last month’s 4.4% and below the peak of 4.9% in July and August.

The government is scheduled to report October’s inflation rate by Nov. 5.

The Monetary Board is scheduled to hold its eighth and final policy meeting for the year on Dec. 11.

At the same time, Mr. Tetangco cited the US Fed’s next move as “one of the factors” the Monetary Board will consider in its upcoming regular policy review.

“With the latest Fed communications pointing to a more dovish approach to its tightening plan, the BSP may be able to bide some time [sic] to allow these policy adjustments to pass through the economy,” Mr. Tetangco said.

The US Federal Reserve is expected to announce today an end to its two-year old bond-buying program known as quantitative easing.

Federal Reserve Chair Janet Yellen has likewise committed to keep interest rates at near zero for a “considerable time” in the face of a US economy that is still recovering.

For this year, the Monetary Board has so far raised key interest rates by a total of 50 basis points (bps) to 4% and 6% for overnight borrowing and lending, respectively, rates of Special Deposit Accounts also by a cumulative 50 bps to 2.5%, and banks’ reserve requirement ratio by a combined two percentage points.

In its meeting on Thursday last week, the Monetary Board held its fire on further policy adjustments amid signs that inflation would generally ease towards 2016, saying it wanted the impact of earlier tightening rounds to make its way through the economy. It also cut inflation forecasts to 4.4% from 4.5% for this year, 3.7% from 3.8% for 2015, and 2.8% from 3% for 2016. Inflation averaged 4.4% in the nine months to September as the rise in prices of widely used goods eased to 4.4% last month after an almost three-year-high hike of 4.9% in July and August. -- Mikhail Franz E. Flores