BANGKO Sentral ng Pilipinas Governor Amando Tetangco Jr. said a move by the US Federal Reserve to increase interest rates this week will remove one source of uncertainty in financial markets.
The Fed is scheduled to meet Wednesday and Thursday (Manila time) and a decision whether or not to increase interest rates would be known Thursday.
“… The expectation is that the Fed is most likely hiking interest rates by 25 basis points. The probability is close to a 100 percent. So I think the markets have started to slowly priced this in since this has been expected for some time already, given the pronouncements of different Fed governors as well as the chairperson herself [Janet Yellen],” Tetangco said at the sidelines of the Chamber of Thrift Banks annual convention held in Dusit Thani Hotel in Makati City on Tuesday.
“So, when this happens, it is going to remove at least one source of uncertainty in the market. But the next question would be when is the next move and by how much?” Tetangco asked
Tetangco said during the process of normalization in Fed policy, some volatilities would continue to be seen in financial markets, particularly the foreign exchange and the stock market.
“… You know, we get reports about economic data not only in the US but also in Europe and other advanced countries. We just have to manage our own markets here in such a way that we don’t experience a destabilizing moves or sharp fluctuations in market prices. We also monitor market conducts to ensure that we continue to have an orderly market conditions,” Tetangco said.
Earlier, Tetangco said the Philippines should not move in sync with the Fed if it decided to increase interest rates in its meeting this month. The last time the Fed raised rates was in December 2016.
He said the Philippine setting was different from what was happening in the world’s largest economy. He said local monetary authorities were currently closely monitoring what could be the impact to growth and inflation of the highly-anticipated passage into law of the government’s proposed tax reform program.
The policy-setting Monetary Board of Bangko Sentral in its last meeting on Feb. 9 kept the benchmark interest rates steady, mainly on the back of strong domestic economic growth and manageable inflation rate.