Bangko Sentral ng Pilipinas is closely watching the US election and the next move of the Federal Reserve which will influence its own decision on whether it will keep or change the local interest rates on Nov. 10, Governor Amando Tetangco Jr. said Thursday.
Tetangco made the statement after the US Fed kept its interest rates unchanged Wednesday, in line with the expectations of the market.
“The Fed action is as expected, especially before the US elections. Analysts are parsing the statement and focusing on the word ‘some.’ Analysts say the Fed may have set the bar low for a December move…. so if that move does materialize, then it would not come as a surprise to the market,” Tetangco said in a text message.
“That said, there is a lot to watch out for in the next week. And it’s not likely that markets would make large movements in the meantime. We will continue to monitor developments both external and domestic, and consider these in our own policy assessment at our meeting next week,” Tetangco said.
Despite keeping interest rates unchanged before the US election, the Fed hinted it could raise rates next month as the world’s largest economy sustains momentum and inflation accelerates.
US policymakers were also hopeful that inflation was moving toward their target of 2 percent. “The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,” the Fed said in a statement following a two-day meeting.
The US will hold the presidential election on Nov. 8, and the uncertainty already weighed on investor sentiments in many markets including the Philippines, where a win by Donald Trump was viewed as inimical to the business process outsourcing sector.
The benchmark Philippine Stock Exchange index lost 8 percent over the last 9 trading days.
Bangko Sentral in its policy meeting on Sept. 22 kept the benchmark interest rates steady as economic growth remained robust and inflation manageable. Interest rates stayed at 3.5 percent for overnight lending, 3 percent for overnight borrowing and 2.5 percent for overnight deposits.
Economic growth in the first half averaged 6.9 percent, near the upper bound of the Duterte administration’s target range of 6 percent to 7 percent.
Inflation was subdued at 1.6 percent in the first nine months, below the target range of 2 percent to 4 percent.