PH economy ready for higher rates

BAGUIO CITY, Philippines—Higher interest rates are not likely to be a substantial drag on the country’s economic growth, the Bangko Sentral ng Pilipinas (BSP) assured, citing buffers that have been built up over the years.

BSP Deputy Governor Diwa C. Guinigundo over the weekend said there was no way for monetary policy settings in the Philippines to go but up, with benchmark interest rates having been at record lows since late 2012.

“There’s still maneuvering room to keep rates steady or even consider an increase if and when the Fed hikes its rates,” Guingundo said.

Speaking to reporters at the sidelines of an Economic Journalists’ Association of the Philippines (Ejap) forum, Guinigundo explained that interest rates in the country would have to move in tandem with the US Federal Reserve’s own adjustments.

If the BSP keeps rates at their record lows—3.5 and 5.5 percent for the overnight borrowing and lending rates, respectively—the country would lose out to other countries in attracting investments.

“The economy can absorb it. The country’s strong fundamentals enable the government and the BSP to take measures that are necessary,” he said.

At its meeting last month, the BSP’s Monetary Board hiked required deposit reserves of banks by one percentage point—signaling the start of what could be several adjustments to tighten monetary settings.

In a separate statement last week, BSP Governor Amando M. Tetangco Jr. reiterated that the space to keep policies accommodative had “narrowed,” citing inflation forecasts near the high end of the central bank’s targets for 2014 and 2015.