PH resilient from US Fed rate hike

Whether or not the US Federal Reserve eventually raises interest rates, the Philippine economy will be resistant from any shock, according to the chief economist of the Department of Finance.

“The Philippines can maintain its growth trajectory with one uncertainty taken out from the economic environment. Whether or not the Fed started the liftoff, our macroeconomic fundamentals are strong enough to withstand higher interest rates,” Finance Undersecretary Gil S. Beltran said.

The US Fed kept rates at 0-0.25 percent on Thursday (Friday morning in the Philippines) despite earlier expectations of a rate increase.

“Our projects have very high internal rates of return so that they can be viable even at higher rates,” Beltran added.

In a note to clients, UK-based Standard Chartered Bank noted that the US Fed “sounded worried about recent global turbulence and the tightening in financial conditions.”

“We continue to expect a December rate hike; further ‘wait and see’ stance is likely at the October meeting,” Standard Chartered said.

“While an October rate hike is not impossible, we think it remains unlikely given the September meeting’s tone. A ‘wait and see’ stance may continue. We continue to expect a December rate hike—probably signaled more firmly at October’s meeting—assuming volatility subsides and US growth stays solid,” it explained.

Also, Standard Chartered said it expected that the Fed tightening cycle would “likely be shallow.”

“We continue to expect two rate hikes next year, with the interest rate on excess reserves leveling off at a relatively shallow level of 1 percent by June 2016. The main risk to this view, further confirmed by [Thursday’s] meeting, remains to the downside—an even shallower rate-hiking path or potentially no rate hike at all,” it said. Ben O. de Vera