The central bank said it sees no reason to change its monetary policy for now, but affirmed its vigilance in watching over global developments that could have any adverse impact on the Philippine economy.
The Bangko Sentral ng Pilipinas (BSP) issued the statement following the decision of the ECB to pump billions of euros a month into the eurozone by buying government, institutional and private sector bonds at least until September 2016.
“We don’t yet see a strong impetus to change the stance of monetary policy, but we will continue to monitor new data and factor into our forecasts the dampening impact on inflation and possible second round effects on global economic growth of lower oil prices, in light of fresh liquidity injections by ECB [European Central Bank] and the expected path of policy normalization by the Fed,” BSP Governor Amando Tetangco Jr. said in a text message to reporters on Friday.
The BSP governor said he believes the ECB action to further ease monetary conditions in the European Union [EU] should boost market confidence in the near term, especially as uncertainty over what action the ECB would take to stimulate the eurozone economies has been eliminated.
Western policy divergence, oil price impact
Tetangco pointed out, however, that in the near term, the ECB bond-buying program needs to be followed through by structural reform in the national economies and some adjustments to the EU labor market conditions, among others.
“While we had been anticipating a QE [quantitative easing]from the EU for some time, and the price action in markets in recent months has reflected the divergence in AE [advanced economies]monetary policies, we still need to see how this policy divergence will continue to play out now that we are in a situation of very low oil prices,” he said.
Crude oil prices jumped $0.85 to $47.16 a barrel after King Abdullah of Saudi Arabia, the world’s biggest oil exporter, died. His death was immediately viewed as adding uncertainty to supply and price prospects in the oil market, as well as global economies.
Keeping financial volatility in check
In the meantime, Tetangco said the BSP is “geared” to keep the interim financial volatility in check.
Earlier, the BSP chief said the Monetary Authority of the BSP would continue to be guided by its inflation outlook in dealing with the risks that financial market volatility may bring to the Philippines and other emerging market economies.
Tetangco said the monetary authority remains focused on its inflation mandate, and will act as guided by its inflation outlook.
2015 inflation also seen within target
The BSP sees inflation staying within its 2 percent to 4 percent target this year. Inflation in 2014 averaged 4.1 percent, settling within the 3 percent to 5 percent target range.
Meanwhile, the Monetary Board at its December 11 meeting decided to keep its existing rates unchanged for overnight borrowing and lending, as well as the special deposit account and the reserve requirement ratio for banks.