BSP weighs options as Fed hike looms

Bangko Sentral ng Pilipinas. INQUIRER.net FILE PHOTO

The Central bank has its hands on its many policy levers, ready to make adjustments if necessary to curb volatile market conditions that could lead to economic instability.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said authorities were studying whether adjustments in monetary policy settings would be necessary. The BSP’s Monetary Board meets to determine policy settings in two weeks.

Tetangco’s statements followed the improved outlook for the US economy by the Federal Reserve. The American central bank met earlier this week and kept its key interest rates at their current record lows.

In a statement, the US Fed said it continued to see more signs of strength for the American economy, bolstering expectations of a rate increase by September or December of 2015. This would be the first Fed rate adjustment since the 2008 global financial crisis.

“We will factor in all these during our next policy meeting, to see if there is any need to make adjustments to our policy levers to address any possible financial stability risks,” Tetangco said in a statement.

On Thursday, the peso dipped to a fresh five-year low of 45.62-to-$1, losing five centavos from Wednesday’s close of 45.53: $1.

Trading volume rose to $690.55 million from $507.7 million the day before. The local currency opened at 45.55: $1, its intra-day high, before hitting a low of 45.65: $1 early in the session.

“With the improvements in some of the economic indicators that the Fed is looking at, the market seems to now be shifting its focus from lift off to the speed of normalization,” Tetangco said.

“We will monitor how any such shift would affect market behavior, especially as the recent relative calm in China’s financial markets may temper potential outflows from emerging markets,” he said.