MANILA, Philippines—Philippine central bank Governor Amando M. Tetangco Jr. refused to mince words on Wednesday as he signaled that current monetary policy settings would stay where they were for the moment if current conditions would stay the same.
Several risks to prices, financial markets and real economic growth remain, all of which the Bangko Sentral ng Pilipinas (BSP) is wary of, but for the moment, the conditions appear calm.
“If the inflation situation and forecast remain favorable and manageable… the market can expect the BSP to maintain its current policy stance,” Tetangco said at a forum organized by the Foreign Correspondents’ Association of the Philippines.
Last week, the BSP took a pause from its monetary policy tightening cycle that started in March, keeping the benchmark borrowing rates unchanged. Other levers, such as reserve requirements on banks and rates on special deposit accounts (SDA), were also kept steady.
Between March and September, the policy-making Monetary Board made use of its full tool kit adjusting reserve requirements, SDAs and overnight borrowing rates as authorities sought to keep prices in check.
Earlier this week, Tetangco said in a statement that the BSP wanted to see previous policy moves work their way into the economy. For now, he said, the BSP was “confident” that inflation targets for this year up to 2016 would be met.
Inflation in October is expected to average between 3.7 and 4.6 percent, falling further from the peak of 4.9 percent in July and August.
Tetangco’s dovishness comes as the US Federal Reserve meets later this week. He said most market players were expecting the US Fed to finally put to an end a bond-buying program launched in 2009 that caused a flood of cash in the global economy.
The possible consequence, Tetangco said, was the further repatriation of foreign capital from emerging markets like the Philippines back to the US as investors become more picky with their bets.
As the US prepares to tighten its policies, other major markets like Europe and Japan have and would likely continue to ease their own monetary settings—a convergence that may spell confusion and volatility in global markets.
On the local front, Tetangco said the BSP was watching out for “any possible dislodgment of inflation expectations should second round effects appear.”