The Bangko Sentral ng Pilipinas (BSP) said the latest monetary policy action of the European Central Bank (ECB) could make global financial markets more stable over the medium term.
The BSP statement came after the ECB surprised financial markets on Thursday with a new cut in key interest rates and plans for an asset purchase scheme to ward off deflation in the eurozone area.
The ECB reduced its central “refi” refinancing rate to 0.05 percent from 0.15 percent. It also lowered the deposit rate to minus 0.20 percent from minus 0.10 percent and trimmed its marginal lending rate to 0.30 percent from 0.40 percent.
“The ECB move weakened the EUR (euro), affecting regional currencies with it. We could see portfolios further rebalance toward the USD,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.
Tetangco added that over the medium term, the BSP sees more stability in the financial markets if the ECB move is successful in arresting deflationary pressures in the European Union.
In the case of the Philippines, the central bank believes that as the country’s fundamentals remain intact, the latest ECB action will not translate into significant capital outflows.