BANGKO Sentral ng Pilipinas Governor Amando Tetangco Jr. said there is no need to change the current monetary policy settings, even if the US Federal Reserve on Tuesday said there could be a delayed pace of interest rates hike this year.
“We don’t see any need to veer away from current monetary stance and foreign exchange policy, but we will make adjustments should such be needed to keep any buildup of unwarranted market exuberance at bay,” Tetangco said in a text message Thursday.
Fed chairman Janet Yellen on Tuesday said global economic uncertainty including the slowdown in China and declining oil prices led to the delay of an interest rate hike in January and March.
Yellen said she was expecting “gradual increases” in interest rates in the future.
The Fed’s comments, Tetangco said, fortified market views that the US central bank had turned more dovish than first anticipated when it began a rate lift-off last year. The Fed increased interest rates on Dec. 17, 2015.
“This seems to indeed have given the market more confidence to take on risk, as evidenced from the positive sentiment on emerging markets assets and currencies,” Tetangco said.
The peso on Wednesday posted a fresh five-month high against the greenback and neared the 45-a-dollar level. The local currency gained P0.32 to close at 46.03 from 46.355 Tuesday. It was its strongest level since the 45.85 on Oct. 15, 2015.
Tetangco cautioned that markets should be careful “not to get ahead of themselves here, as the underlying US economic trend continues to be relatively better than the rest of the world.
He said local monetary authorities would continue to monitor these developments that could affect other financial markets.
The last time the Monetary Board changed the policy stance was in September 2014, when overnight borrowing rates was increased to 4 percent and overnight lending adjusted to 6 percent.
The board during its March 23, 2016 meeting kept the benchmark interest rates steady for the 12th consecutive time since October 2014 due to a more manageable inflation environment.
The interest rates on term RRPs, RPs, special deposit accounts and the reserve requirement ratios were likewise left unchanged.
Tetangco said the Monetary Board’s assessment of manageable inflation
outlook and robust growth conditions continued to support keeping monetary policy settings unchanged.
Latest forecasts indicated that average inflation was likely to settle
within the target range of 2 percent to 4 percent for 2016-2017, while inflation expectations continue to be firmly anchored within the inflation target band over the policy horizon.
The board also reduced the inflation average forecast this year to 2.1 percent from the earlier estimate of 2.2 percent, and to 3.1 percent from 3.2 percent for 2017.
The inflation averaged 1.1 percent in the first two months of 2016, way below the target range of 2 to 4 percent this year. January inflation further decelerated to 1.3 percent from 1.4 percent in December. Inflation further slowed to 0.9 percent in February.