BSP doesn’t have to ‘move in step’ with Fed adjustments — Diokno
The Bangko Sentral ng Pilipinas (BSP) chief does not expect to react to the expected rate hikes from the US Federal Reserve in the near-term as monetary policy decisions will be based on domestic developments.
“For the Philippines, we do not necessarily have to move in step with the monetary policy adjustments of the US Fed,” BSP Governor Benjamin E. Diokno told Global Source Partners in a Thursday report.
“The BSP calibrates its monetary policy settings in response to external developments only to the extent that they influence the outlook on growth and inflation.”
He said the central bank uses its flexible exchange rate system and external buffers to deal with short term volatility.
US Federal Reserve Chairman Jerome H. Powell has said the central bank may raise interest rates starting in March, although the pace of later rate hikes is yet to be decided.
Last month, the International Monetary Fund said emerging economies should prepare for a US Fed policy tightening that could rattle financial markets.
The Philippine external position and the peso could weaken as investors price in this Fed rate hike, analysts said.
Meanwhile, Mr. Diokno had previously said that a BSP rate hike is unlikely within the first half of this year.
“Future monetary policy decisions will continue to be data-driven and anchored on evolving domestic developments to avoid unintended consequences associated with protracted easy monetary policies,” Mr. Diokno told Global Source Partners.
He said the BSP will avoid unwinding policy measures either too early or too late so that it could sustain economic recovery and avoid price and financial stability threats.
Risks to the country’s outlook still include pandemic-related uncertainties, including the emergence of new coronavirus disease 2019 (COVID-19) variants that could delay the reopening of the economy. A more aggressive vaccination rollout could prove to be a positive factor.
“Nevertheless, the BSP remains committed to its primary mandate of maintaining price stability conducive to balanced and sustainable growth and employment,” Mr. Diokno said.
While the BSP expects supply-side pressures to subside, Mr. Diokno said it will continue to watch “for any signs of inflation becoming broader based while continuing to support the various non-monetary interventions of the National Government.”
Inflation slowed to 3% in January, the fifth straight month of deceleration, as housing and utilities prices eased, preliminary data showed. — Jenina P. Ibañez
