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THE Bangko Sentral ng Pilipinas (BSP) is seen to
leave its key overnight rates unchanged, as monetary authorities
shrugged off its US counterpart’s recent effort to pump more
liquidity into the world financial system.
A day before the scheduled
policy meeting, Development Bank of Singapore (DBS) said the current
Philippine inflation outlook no longer provides scope for further
monetary policy easing as headline inflation has risen to 5.4
percent in February.
DBS also said inflation is
unlikely to fall within the central bank’s 3 percent to 5 percent
target range this year, adding price increases would likely average
5 percent this year as risks are clearly to the upside.
“Should monthly increases
in the [consumer price] index remain stubbornly high and fall above
the 36-month average of 0.42 percent in the coming months, the year
on year change measure of inflation could easily rise and stay above
6 percent,” it said.
After consumer price increases
accelerated to a 16-month record, the BSP had said it will revise
its inflation forecast for the next two years, citing costlier crude
and food items.
Local monetary authorities
however said the US Federal Reserve’s recent stimulus plan would
not influence their policy setting scheduled today.
BSP Governor Amando M. Tetangco
Jr. said the latest Fed move is largely directed at providing order
in the US market.
“It should not greatly
and immediately influence our own policy setting,” he told
reporters in a text message.
But Tetangco said the
central bank would continue to be watchful of the US Fed’s impact
on capital movements between developed and emerging markets,
including the Philippines.
To ease a global credit
squeeze, the Fed, along with other major central banks, on Tuesday
night decided to pump hundreds of billions of dollars of liquidity
into the world’s financial markets.
This included a new auction
program for US lenders, which will enable them to swap thinly traded
mortgages and other collateral for safer Treasury obligations.
The Fed said it was
offering $200 billion for the facility, with a term of 28 days
instead of overnight under an existing program.
The Fed also said it has
authorized increases in its existing temporary reciprocal currency
arrangements or swap lines with the European Central Bank (ECB) and
the Swiss National Bank (SNB). The Fed will provide up to $36
billion for the purpose.
The move was coordinated
with the ECB and SNB along with the Bank of Canada and Bank of
England. The new lending auction “is intended to promote liquidity
in the financing markets for Treasury and other collateral and thus
to foster the functioning of financial markets more generally,”
the Fed said in a statement.
The Fed action is designed
to get more funds to banks hit by the credit crunch and thus
cautious about inter-bank loans.
--Chino S. Leyco with AFP
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