BSP says present policy rates remain appropriate

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) welcomed last year’s strong growth by saying policy rates remain appropriate and that focus should be given on managing capital inflows, hinting on future measures to encourage some outflows.

“This is another data point that supports the view that the stance of monetary policy remains appropriate for now,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.

“This gives us more degrees of freedom to adjust our market operations and institute other macroprudential tools as appropriate,” he added.

Discussions are being conducted on a fresh wave of foreign exchange liberalization, BSP Monetary Board member Felipe Medalla said on Wednesday, with an end in view of encouraging some outflows.

“We should do more of that. Our impression really is that we are already open and that it is very easy to take money from the Philippines. Of course, there are banks that say otherwise,” Medalla told reporters.

After slashing policy rates by a total of one percent last year, the BSP has shifted gears toward instituting specific measures targeted against capital inflows and their tendency to cause market volatility and excessive peso appreciation.

Among those unveiled were a series of foreign exchange liberalization measures, effectively easing restrictions in investing and spending money offshore. The central bank has said these are meant to facilitate better investment climate in the country.

Measures included allowing importers to pay in advance for their shipments, lifting conversion requirements for foreign direct investments and exempting foreign loans for infrastructure projects from prior BSP approval.

 â€œWe are discussing. We are a quite aware that there is some still finding it hard to bring money outside the Philippines. We are looking at that,” Medalla said.

On the other hand, capital controls, including a 90-day holding period for portfolio inflows mentioned in December, are not being thought of for now, he added.

 â€œWe are not thinking of imposing minimum stay requirement on money that enters the stock exchange. If at all, the capital that enters the bond market will be the one targeted,” Medalla explained.

 â€œThe foreigners who buy the GS (government securities) are most likely the ones who are in speculative mode in terms of the currency,” he added.

For his part, Tetangco said the absorptive capacity of the economy has improved alongside its stellar economic performance. He noted infrastructure and investments expanded in line with employment, suggesting growth is translating to more jobs.

His deputy governor, Diwa Guinigundo, agreed, urging the government to “continue its drive for good governance, infrastructure and social spending” for “sustainable and resilient economic growth.”