The Philippine Star

Phl to benefit from Fed rate decision – BSP

- By LAWRENCE AGCAOILI

The Bangko Sentral ng Pilipinas (BSP) said the possible rate hike by the US Federal Reserve in September would be positive for emerging market economies including the Philippine­s.

“With the assessment that near-term risks to the economic outlook have diminished, analysts see there could be a move as early as September. Although the statement did not strongly point towards one,” BSP Governor Amando Tetangco Jr. said yesterday.

Tetangco said the decision of the US Fed to keep rates steady points to the continued normalizat­ion of interest rates in the US.

“That assessment should be overall positive for emerging market economies, including Philippine­s, as it reflects a move towards normalizat­ion, and that the US will indeed be another post for global growth going forward,” he said.

The BSP chief said the country’s monetary policy stance remains appropriat­e amid the robust domestic demand as well as the benign inflation environmen­t.

“That said, this would still not be reason enough for us to change the stance of monetary policy. The outlook for domestic inflation remains well-anchored, and domestic demand continues to be solid,” Tetangco said.

The BSP has kept interest rates unchanged for 14 straight rate-setting meetings since October 2014 due to modest inflation and sustained economic growth.

The economy grew 6.9 percent in the first quarter from 6.5 percent in the fourth quarter of last year due to robust private consumptio­n and strong fixed capital investment­s.

Economic managers of the Duterte administra­tion have lowered the gross domestic product growth target to a range of six to seven percent instead of 6.8 to 7.8 percent.

Inflation averaged 1.3 percent in the first half, way below the BSP target of between two and four percent.

The central bank shifted to the interest rate corridor system last June 3 to further enhance the transmissi­on of the BSP’s policy decisions to relevant money market rates.

The framework calls for the shift to the use of floor and ceiling rates for short-term financing to be determined through the auction of seven- and 28day deposit maturities initially set at once a week.

The rate for the overnight lending facility (ceiling) was set at 3.5 percent while that of the overnight reverse repurchase rate was set at three percent. The rate for the overnight deposit facility (formerly the special deposit account) is still unchanged at 2.5 percent.

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