MANILA—Bangko Sentral ng Pilipinas (BSP) does not need to mirror the latest hike in the Federal Reserve’s key rates.
This was stressed by BSP Governor Amando M. Tetangco Jr. Thursday after the Fed increased key rates by 25 percentage points between a range of 0.75 percent and one percent after the March 14-15 meeting of its policy setting Federal Open Market Committee (FOMC).
The increase was made about three months after the Fed hiked it by 25 percentage points last December to a range between 0.50-0.75 percent, which in turn was made after keeping the rates between zero to 0.25 percent for nearly a decade.
Tetangco said the Fed’s decision “though widely expected still contained valuable market information, particularly the indication of continued gradual pace of next steps and the consequent market interpretation that the Fed is willing to let inflation overshoot.”
“In a way that can be seen as positive for risk sentiment in the near term, but on the whole the Fed’s balanced view could be good for global growth and trade particularly for trading partners of the US like the Philippines,” he said.
With this, the central bank chief said Philippine monetary officials “will therefore watch out for further developments on the trade side to see the impact on bank and corporate credit activities.”
“At the moment, however, given the Fed action was as expected and inflation for now is seen to be well-behaved, there appears to be no need to tweak policy settings,” he added.
The next meeting of the BSP’s policy-making Monetary Board (MB) is scheduled on March 23, 2017.
To date, the BSP’s key rate is three percent, which is the reverse repurchase (RRP) rate.
The RRP rate is the key rate of the BSP’s Interest Rate Corridor (IRC) while the 2.5 percent rate of the special deposit account (SDA)serves as the floor rate and the 3.5 percent repurchase (RP) rate is the ceiling rate.