Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the latest move of the US Federal Reserve to raise interest rates by 25 basis points would not have a significant impact on financial markets, including the Philippines.
“Because market has fully expected the 25bp hike, the market reactions so far [stronger US dollar, lower stocks and higher US treasury yields] are not unexpected. What will be spoken of more today is the Fed dot plot, which shows a more ‘hawkish’ Fed than market first expected,” Tetangco said in a text message to reporters.
“But even then, the market would likely not dwell too much on that because market also knows that those dots do change over time,” Tetangco said.
Finance Secretary Carlos Dominguez III expressed optimism the country’s solid macroeconomic fundamentals along with the President Rodrigo Duterte administration’s infrastructure buildup strategy would create enough fiscal and monetary buffers for the Philippines to ride out external shocks such as the latest move by the Fed.
The Fed on Wednesday raised interest rates for the first time in a year, and only the second time since the 2008 financial crisis. The Fed also hinted of three additional rate increase next year, higher than the previous expectations of two rate hikes.
Fed chief Janet Yellen said “growth is a touch stronger, unemployment is a shade lower” as she announced a 0.25-percent increase in the benchmark rate to 0.50 percent to 0.75 percent. The previous rate increase happened in December 2015 when the benchmark rate was lifted from near-zero for seven years since the crisis.
Tetangco expressed optimism of a calmer domestic financial market, particularly the peso-dollar exchange rate, saying the Fed’s move has already been priced in before the decision came out.
“I am hopeful the recent US dollar-Philippine peso movements have also factored these in and that any further movement during the balance of the year would only just be small refinements to bank positions,” Tetangco said.
Meanwhile, Dominguez assured the public and the business community that the government was maintaining its growth targets for the short and medium term, as its priority programs were on course to keep the Philippines as one of Asia’s fastest-growing economies,
“This Federal Reserve hike has long been anticipated and that speculation over this move has been one major cause of the market jitters that have riled financial markets across the globe in recent weeks,” Dominguez said.
National Treasurer Roberto Tan also said “the rate hike has long been anticipated” and that “the market would have to digest the impact of this move, including the foreseen three other rate increases for 2017 and expectation of new fiscal and economic policies of the Trump Presidency.”
“We remain confident that despite these external developments and market volatility, the country’s fundamentals and economic resilience will carry us forward. This Administration will continue to pursue its economic agenda including aggressive investments in infrastructure and broad-based social services,” Tan said.