US decision seen to ease uncertainty in Phl markets

MANILA, Philippines - The US Fed’s decision to end its monthly bond purchase program should reduce uncertainty in financial markets including those in the Philippines, the Bangko Sentral ng Pilipinas said yesterday.

BSP Governor Amando M. Tetangco Jr. said this should allow the central bank to keep its rates steady amid manageable inflation expectations.

“We will remain watchful of market conduct, particularly in the near-term in the spot FX (foreign exchange) market, to check for threats of possible excessive moves and if there is need for BSP to act,” Tetangco said.

“That said, the Fed action gives us some latitude to keep rates steady as our own domestic inflation dynamics are also now fairly stable and allow previous monetary policy actions to filter through the economy,” he said.

The Monetary Board decided to keep its key policy rates unchanged after inflation expectations settled within target for this year until 2016. 

Earlier, the BSP raised the overnight lending and overnight borrowing rates by a total of 50 basis points to ensure inflation will remain within target especially for 2015. The central bank has raised the reserve requirement ratios and the Special Deposit Account rate to rein in excess liquidity and ensure the stability of the financial system.

The US Federal Reserve, following a two-day meeting, ended its bond-buying program it introduced in 2009 to pump money into the ailing US economy.

The Fed cited the improving signs such as labor market indicators that point to a gradual but continuously recovering US economy despite uneven global growth prospects.

“The Fed’s announcement of the end of taper was widely expected, and to the extent this confirms the underlying strength of the US economy, it should be positive for EME (emerging markets and economies) trading partners of the US, including the Philippines. This also takes out one aspect of uncertainty in the market,” Tetangco said.