The Bangko Sentral ng Pilipinas (BSP) said the US Federal Reserve’s decision to keep its interest rates steady means that the Philippines need to focus on domestic sources of growth despite robust demand.
“Even as domestic demand is seen to remain firm, the Fed move means (for us) a greater need to consider domestic sources of growth, given an apparent global fragility,” BSP Governor Amando Tetangco Jr., told reporters in a text message on Thursday.
This statement is in response to queries after the Fed decided to keep its key rates unchanged, as well as signaling fewer rate hikes in coming months as the US continues to face risks from an uncertain global economy.
“The Fed decision was broadly expected. The continued consideration of global developments reflects a recognition of the dynamics of potential spillovers and spillbacks across economies,” Tetangco said.
The BSP chief also pointed out that a stronger currency and its possible implications for growth, plus accommodative policies abroad further lower the urgency for a rate hike from the Fed.
In the Philippines, Tetangco said monetary authorities continue to see no pressing need to change the stance of monetary policy at this time.
“Nevertheless, we remain attentive to developments to see if there is reason to adjust the policy stance. Our current stance of monetary policy still remains appropriate, but we have flexibility. There is also ample fiscal space,” he said.
The Monetary Board at its most recent meeting in February kept the central bank’s overnight borrowing and lending rates at 4 percent and 6 percent, respectively.
Equity markets and currencies in the region reacted favorably to the Fed decision, with the local Philippine Stock Exchange index closing more than two percent higher Thursday.
In a related development, the peso gained 40 centavos against the US dollar on Thursday, closing at P46.38 from P46.78 the previous day.
It was the strongest finish for the peso in more than five months since October 19 last year, when the local currency strengthened to P46.07 to the dollar.
The peso opened at P46.53 to $1 at the Philippine Dealing System before trading between P46.36 and P46.54. Total transactions rose to P986.5 million from P669.65 million in the previous session.