PH unlikely to match US Fed hike

Despite a looming US Federal Reserve rate hike this month, the Bangko Sentral ng Pilipinas’ (BSP) Monetary Board would likely not tweak policy rates at its meeting on March 23 but may revise inflation forecasts, Governor Amando M. Tetangco Jr. said Monday.

“The market has been slowly adjusting to the March hike as seen in auction results and even on the peso movements. While the anticipatory moves of the market could pave the way for a smoother price action should the Fed actually hike in their March meeting, there might still be volatility if the Fed disappoints,” Tetangco said in a text message to reporters, referring to the upcoming meeting of the policy-setting Federal Open Market Committee (FOMC) on March 14 to 15.

The peso slid to the 50:$1 territory in mid-February, which economists blamed mostly on the increased likelihood that the US Fed would finally tweak rates.

“We will monitor market reaction and allow for the market to take some pressure off positions they have built, but we will not hesitate to come in should moves be excessive. We will also refresh our inflation forecasts for the Fed action,” Tetangco said.

“We remain data-dependent and take into consideration the latest and expected developments in our assessment,” he added.

Last month, the Monetary Board raised its inflation forecasts for 2017 and 2018 to 3.5 percent and 3.1 percent, respectively, from 3.3 percent and 3 percent previously.

The Monetary Board, the BSP’s highest policy-setting body, attributed its higher forecasts to increasing fuel prices on top of a weakening peso that began in the fourth quarter of last year.

The adjusted projections nonetheless remained within the government’s 2 to 4 percent target for the next three years.

The Monetary Board kept key policy rates steady during its Feb. 9 policy meeting, noting baseline forecasts “continue to indicate that the future inflation path will remain within the target range.”