BANGKO Sentral ng Pilipinas Governor Nestor Espenilla Jr. said there is no need to change the current policy stance at the moment, adding monetary authorities should not move in sync with the US Federal Reserve.
Espenilla said at the sidelines of an event in Makati the US Fed was trying to decide the pace and timing of its policy normalization.
“They have articulated that they are going to normalize but you know, as weeks pass, they themselves are changing. That is really what data is telling them. It is no longer as clear as what it used to be. This is why, to my mind. [it is] premature to react to weekly and daily events,” Espenilla said.
The Fed in the middle of this week left the prevailing rates unchanged. After a two-day policy meeting, the Federal Open Market Committee came out with a statement hinting a rate hike might happen in September.
“The committee expects to begin implementing its balance sheet normalization program relatively soon, provided that the economy evolves broadly as anticipated,” the post-meeting statement read.
DBS Bank of Singapore said if the US economy continued to grow and added jobs as expected, “our guess is the Fed will pass on an interest rate hike in September but resume normalization in December and hike once-per-quarter in 2018.”
On June 22, the policy-making Monetary Board of Bangko Sentral kept the benchmark interest rates steady on lower inflation and expected robust domestic economic growth.
The interest rates of 3.5 percent for overnight lending, 3 percent for overnight borrowing, and 2.5 percent for deposit facilities were maintained. The MB also kept the reserve requirement ratios.
The manageable inflation prompted the board to reduce the inflation average forecast this year to 3.1 percent from the 3.4 percent estimate made on May 11. The forecast for 2018 was kept steady at 3 percent. The inflation average forecast for 2019 was estimated at 3 percent.
Private sector economists in a survey expect inflation to remain subdued this year
and in 2018 due mainly to lower global oil prices and electricity rates.