Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Thursday the latest move by the US Federal Reserve to keep interest rates steady will benefit emerging markets, including the Philippines.
“The Fed standing pat on rates was expected by the market. But that the policy path chart reflected a more dovish stance was new. The FOMC also continued to be mindful of external developments [e.g. Brexit],” Tetangco said in a text message to reporters.
“These may give some more room for EME markets, including the Philippines, to remain supported. There are also domestic factors that market participants will be looking at in the different markets,” Tetangco said.
He said the policy-setting Monetary Board would consider this development during its meeting Thursday next week.
“We will consider these in our next policy meeting to see if there is need to adjust policy settings, including the amount of liquidity to be siphoned off in the succeeding TDF [term deposit facility] auctions,” he said.
The US Fed kept interest rates unchanged Wednesday, but hinted it could still raise rates for the remainder of 2016. Reports said six of the Fed’s 17 policymakers projected just one increase this year.
Fed Chair Janet Yellen said there was a need to see clear signs of economic strength before lifting rates. A sharp slowdown in US hiring in May cast doubts about the strength of the labor market.
The Fed also said the economy would grow only 2 percent in 2016 and 2017, or 0.1 percentage point lower than previously forecast for each year. Yellen was uncertain on the timing of the rate increase.
ING Bank Manila senior economist Joey Cuyegkeng said earlier the Monetary Board would likely maintain the current policy rates steady in its next meeting amid low inflation and robust economic growth.
Cuyegkeng said while inflation accelerated to 1.6 percent in May from 1.1 percent in April, it remained within Bangko Sentral’s forecast for the month of 1.1 to 1.9 percent.
“[The] BSP-MB is likely to keep policy rates steady at next Thursday’s meeting… May inflation of 1.6 percent is in line with BSP’s 1.1 percent to 1.9-percent inflation forecast,” Cuyegkeng said.
“The higher May inflation is still in line with our 2016 average inflation forecast of 1.7 percent which implies steadily higher inflation to end of this year. Inflation expectation remains steady at 3 percent for 2017 while inflation for the rest of the year is expected to trend higher to end the year above 2 percent,” Cuyegkeng said.
Cuyegkeng said the second-quarter GDP growth could accelerate further while the second-half growth could moderate to an average of 6 percent. He said for the whole 2016, the economy could expand 6.5 percent. Growth would be slower at 6.2 percent in 2017, he said.
“We anticipate that higher consumers’ incomes and purchasing power and higher government spending would keep growth at above 6 percent in 2017. Improvement in agriculture output in 2017 would present some upside possibilities,” he said.