MANILA, Philippines—The Bangko Sentral ng Pilipinas (BSP) may further refine crucial economic measures, apart from its current stance on monetary policy, to combat risks to inflation that have crept up in recent months.
BSP Governor Amando M. Tetangco Jr. said that while the country remains in an economic “sweet spot,” which is characterized by high growth and low inflation, developments abroad may force local policymakers to take decisive action.
“BSP stands ready to make refinements to existing macroprudential measures and deploy new ones, if necessary,” Tetangco on Tuesday said, referring to specific economic tools designed to reduce inflation risks.
During Tuesday’s Philippine Economic Briefing, Tetangco also cited developments overseas that threaten the central bank’s inflation target and the government’s full-year growth goal. Chief of these was the uncertainty over the timing of the US Federal Reserve’s decision to scale down its monthly bond-buying program that was started late 2009.
Speculations over the fate of the US Fed’s asset-purchases—worth $85 billion a month—have prompted foreign investors to flee emerging markets like the Philippines and return to developed nations where investment yields are said to have improved.
The asset purchases started by the Fed in 2009 were meant to prop up the US economy by keeping interest rates low. Most market players expect the US Fed to start reducing its asset purchases this September.
Measures that have so far been implemented by the central bank include refinements to its Special Deposit Account (SDA) facility, which was originally devised as a monetary policy tool, but was used as an investment destination by local banks.
One such change involved the introduction of restrictions on foreign money being placed in SDAs. Another is the ban on individual investments in the facility.
“There are still a number of options that we have. We are still undecided which ones to use,” Tetangco said.
Other risks to price stability and economic growth include weak economic conditions in developed markets, particularly in China, Japan, Europe, and the United States—the Philippines’ major trading partners.
Tetangco likewise said the BSP was monitoring developments in war-torn Syria, which may spill over to neighboring countries in the Middle East and, in turn, restrict the flow of the world’s oil supply. This will mean higher fuel prices for countries like the Philippines, which imports nearly all of its oil requirements.
Tetangco also said that the BSP is ready to make adjustments in its monetary policy stance.