Tetangco sees market volatility easing a bit

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. yesterday said “extreme” market sentiments or overeaction may now ease up following a decision by the US Federal Reserve to keep record-low US interest rates on hold even as it hinted a rise may be forthcoming by December. (Related story on B-3)

Tetangco was commenting on the Fed’s decision not to raise interest rates last Wednesday despite recent market volatilities, while analysts were left thinking it will finally increase benchmarks in the last month of the year.

“In a way, this could signal that extreme market reactions are no longer expected, and that they expect more normalcy,” said Tetangco.

“This should be market-positive. That said, as we are essentially a price taker in the scheme of things, we will continue to monitor domestic market reactions, to see if any action is needed on our part to contain undue market volatilities,” he added.

Tetangco said US policymakers seem not as affected before of external factors affective their economy and markets. “The Fed didn’t anymore seem to be as concerned as it was last meeting with the impact of external developments on their own domestic dynamics, as well as the impact of their policy actions on global financial markets.”

The BSP’s Monetary Board in its last policy meeting in September, left key overnight rates unchanged since inflation continue to be benign and they think economic growth momentum is sustainable, giving policy stance “ample room” to keep current stance.

The BSP also continue to assess what it has been noting previously that there is no need to change policy settings at this time because of the weakness in the global economy and the continuing uncertainty in the global financial markets.

The Monetary Board also noted that domestic demand conditions remain firm, supported by buoyant business and consumer sentiment and ample domestic liquidity.