The Bangko Sentral ng Pilipinas (BSP) does not have to raise its policy rates just because the US Federal Reserve did, as such decisions will depend on the domestic situation, BSP Governor Benjamin Diokno reiterated on Thursday.
Diokno was reacting to a question about whether the BSP will follow the US Fed, which in effort to slow down inflation raised the benchmark federal fund rate by 25 basis points to 0.5 percent
“We do not necessarily have to move in pace with the monetary policy adjustments of the US Fed,” the BSP chief said.
He said the Monetary Board would review their inflation outlook and policy stance at their upcoming monetary policy meeting on March 24.
“The BSP calibrates its monetary policy settings in response to external developments only to the extent that they influence the outlook on [economic] growth and inflation,” Diokno said.
Diokno added that the BSP has various tools such as the flexible exchange rate system, a strong external buffer and liquidity enhancing and management mechanisms to deal with any short-term volatility that may arise from risk factors related to potential tightening of financial conditions.
“Nonetheless, our future monetary policy decisions will continue to be data-driven and anchored on evolving domestic developments to avoid unintended consequences associated with protracted easy monetary conditions,” he said.
According to ING Bank, the BSP might soon struggle to manage expectations about inflation as authorities delay the tightening of policy rates while assuming that the Philippines would escape the economic fallout from the Russia-Ukraine conflict.
The bank’s senior economist in the Philippines, Nicholas Mapa, said in his latest commentary the negative effects of the conflict in Europe were now being felt in the Philippines, with prices of fuel at the pump swelling by about 45 percent year-on-year, and expected to ripple through prices of other basic commodities. This, in turn, has prompted a clamor for higher wages and transport fares as well as a relief from the excise tax on fuel.