March Fed rate hike ‘priced-in’ — Tetangco

THE BANGKO SENTRAL ng Pilipinas (BSP) will not adjust monetary policy anytime soon even if a fresh rate “lift-off ” is expected in the United States next week, the central bank chief said yesterday.

BSP Governor Amando M. Tetangco, Jr. said local monetary officials have room to keep policy settings unchanged, with market players now attuned to a rate hike from the Federal Reserve during its March 14-15 meeting.

“Because the market may have already priced-in the March Fed move, we may have no need to make adjustments to policy for the moment,” Mr. Tetangco said in a text message to reporters.

“But as I said, we remain datadependent and take into consideration latest and expected developments in our assessment.”

Fed officials built the case for an interest rate hike in separate speeches last week, capped by hawkish comments last Friday from Fed Chair Janet L. Yellen, who said that higher rates would likely be “appropriate” during next week’s review should employment and inflation data continue to be within expectations.

Back home, the BSP chief said the central bank can keep interest rates on hold during its March 23 meeting, which comes a week after the Fed’s policy decision.

“The market has been slowly adjusting to the March hike, as seen in auction results and even in the peso movements,” Mr. Tetangco said ahead of Monday’s trading.

The peso yesterday opened P50.40 against the dollar — matching Friday’s close that was a new 10-year low since a P50.43 finish on Sept. 12, 2006 — but pulled back to P50.395 by the end of trading.

Looking ahead, Mr. Tetangco said the central bank will continue to keep an eye on market sentiment after next week’s Fed meeting, particularly on its impact on the peso-dollar trading.

“While the anticipatory moves of the market could pave the way for a smoother price action should the Fed actually hike in their March meeting, there might still be volatility if the Fed disappoints,” the BSP chief said.

“We will monitor market reaction and allow for the market to take some pressure off positions they have built, but we will not hesitate to come in should moves be excessive.”

The central bank sometimes steps in during daily foreign exchange trading to temper sharp swings of the peso against the dollar, in keeping with its mandate of maintaining price and financial stability.

Mr. Tetangco also said that the Monetary Board will “refresh” its inflation forecasts to factor in the Fed’s upcoming decision. —