US Fed move to keep funds flowing to emerging markets

Cash is expected to continue to flow into the Philippines and other emerging markets, pushing up values in the stock and foreign exchange markets, following the US Federal Reserve’s decision to keep its asset purchases steady this week.

But Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the Fed’s decision to further delay the start of its so-called taper merely delayed the inevitable.

“The Fed’s decision prolongs the waiting game for the inevitable. In the meantime, we can expect ‘risk on’ behavior in emerging markets,” Tetangco told reporters yesterday.

The Fed’s Federal Open Market Committee (FOMC) this week announced that it would maintain its purchases of mortgage-backed securities and US treasuries at a pace of $85 billion a month.

With the US Fed still pumping cash into the world economy through its asset purchases, the BSP said it would monitor the effects that some of these funds might have on local financial markets.