The central bank said its assessment and projection of inflation will continue to determine the way it will deal with the risks posed to the country’s economy by volatility in the global financial markets.
Such inflation mandate has always guided the monetary authorities’ stance, which has kept the local markets stable, it said.
The Bangko Sentral ng Pilipinas (BSP) issued the statement over the weekend following the International Monetary Fund’s (IMF) warning that emerging market economies (EMEs) and developing economies, including the Philippines, need a powerful policy mix to counter the risks arising from a volatile global financial environment this year.
The IMF said emerging and developing economies could face a “triple hit” from a strengthening US dollar, higher global interest rates and more volatile capital flows.
“Those are the risks EMEs, including the Philippines, face in the near term. Depreciation pressures on the peso, tighter monetary conditions from market reactions to the (US) Fed lift-off, and volatile capital flows that would result from portfolio rebalancing,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.
Amid the uncertainty, the Philippine monetary authority remains focused on its inflation mandate and will act as guided by its inflation outlook, the message said.
Earlier, the BSP said its present policy stance remained appropriate as it saw the inflation rate in 2015 to stay within its 2 percent to 4 percent target range. Inflation in 2014 averaged 4.1 percent, settling within the central bank’s 3 percent to 5 percent target range.
The Monetary Board at its December 11 meeting decided to keep the rates for overnight borrowing and lending, as well as the special deposit account and the reserve requirement ratio for banks, steady.
“Some have criticized us for this posture, which to them seemed narrow. But by keeping true to our mandate, the BSP provides a fixed point of focus and a source of stability for the market, around which the market can plan and strategize for the medium and long term,” he said.
Tetangco also said the central bank will manage financial market volatility in the interim through a suitable policy mix.
These policies include the central bank’s presence in the foreign exchange market, heightened surveillance of market conduct, and fine-tuning of policy levers as needed, he said.
The BSP governor pointed out the central bank will support economic growth to the extent that the inflation outlook allows.
The monetary authority will also continue to push for banking reforms and initiatives that will deepen financial inclusion, he added.
Recently, the Monetary Board approved the waiving of processing fees for the establishment of bank branches in unbanked areas in the country.
The Board also widened the scope of allowable activities and services that microbanking offices (MBOs) could provide.
In addition to the disbursement and release of proceeds of all types of microfinance loans, MBOs can now provide and service other types of loans such as educational loans, health loans and emergency loans, among others, to microfinance clients.