BSP stance different from US Fed – Tetangco

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reiterated yesterday the country’s monetary policy stance would not move in synch with the US after Federal Reserve policymakers hinted they could raise interest rates again “fairly soon.”

BSP Governor Amando Tetangco Jr. said authorities also take into consideration the actions taken by the US Federal Reserve in deciding on the country’s monetary policy stance.

“As is our practice, we include new information from Fed signals in our scenario building,” he said in a text message.

Tetangco said the BSP looks into the potential impact on financial market since this segment is the most reactive to the US Fed decisions in the near term.

He said monetary authorities also assess the impact on banks portfolios especially the interest rate sensitive bank balance sheet account as well as the banks’ capacities to lend to productive sector of the economy.

“In other words, it’s not a linear analysis, not a one to one correspondence. This is why we have always said that, while we are mindful of the Fed, we do not necessarily have to move in sync with it,” Tetangco said.

The US central bank voted to keep interest rates unchanged last month, but Federal policy makers said it may be appropriate to raise interest rates again “fairly soon.”

US Fed chair Janet Yellen also said last week that waiting too long to raise interest rates again would be “unwise.”

The US Fed raise benchmark rates by 25 basis points last December, its second in a decade, as part of moves to normalize interest rates.

It also hinted of possible three rate increases instead of only two this year as robust readings on the economy have bolstered the confidence of Federal Reserve policymakers.

BSP Deputy Governor Diwa Guinigundo said it is important for the US Fed to take action at this time or as early as March due to volatilities in the global financial markets.

“It is important that the US Fed takes action at this time since there is a lot of uncertainty in the market,” he said.

The next rate-setting meeting of the US Fed is on March 14 and 15 while the second rate-setting meeting for the year of the BSP is scheduled on March 23.

“A lot of these uncertainties will not really disappear but will be minimized and that is good for the global markets,” he said.