Monetary policy settings in the Philippines do not have to be in sync with other central banks given the country’s strong fundamentals and well-anchored inflation expectations, the Bangko Sentral ng Pilipinas (BSP) chief said on Monday.
“We monitor what advanced economies’ central banks and central banks in the region do as these affect risk appetite of global investors and therefore capital flows also,” central bank Governor Amando Tetangco Jr. told reporters in a text message.
Monetary authorities, he added, will do what they believe will work for specific circumstances.
Tetangco made the statement ahead of a Monetary Board meeting next week and after the Bank of Japan (BoJ) last week announced that it would be implementing negative rates – in effect charging banks for keeping money with the BoJ — in a bid to stimulate the economy.
Also last week, the US Federal Reserve kept interest rates unchanged – after a December increase that was the first time in nearly a decade – during its first meeting for 2015. The US central bank said it was monitoring ongoing volatility and indicated that it remained set on gradual rate hikes.
While Philippine markets have not been spared from global volatility, the economy has performed within expectations and is reportedly among the strongest in the region.
Inflation is also well-controlled and the BSP’s policy-making Monetary Board, which will hold its first meeting for the year on February 11, is unlikely to announce a shift in stance.
“[W]e don’t have to move in sync. So far our fundamentals have held up against these and other headwinds, aggregate demand remains firm and inflation expectations are well anchored,” Tetangco said.
During its final 2015 policy meeting last December, the Monetary Board kept the central bank’s overnight borrowing and lending rates at 4 percent and 6 percent, respectively.
“Election spending has a small positive impact on GDP [gross domestic product]and could raise inflation slightly. But these are not expected to persist. Many of the critical economic reforms have been institutionalized, so we can expect continuity of policies,” Tetangco said.
For this year, the central bank forecasts inflation to average 2.4 percent before inching up to 3.2 percent in 2017.