BSP has room to support growth, tame volatility
The Bangko Sentral ng Pilipinas has policy space to support growth and stem market volatility, its governor said on the weekend, underscoring authorities' readiness to act as uncertainties cloud the outlook for the global economy.
Bangko Sentral ng Pilipinas Governor Amando Tetangco said authorities must stay vigilant to risks to the economy posed by the euro zone's debt crisis, slowing Chinese growth and the prospect of higher interest rates in the United States, though he expected the country to weather a "taper tantrum"-style shock.
Tetangco was referring to the period in 2013 when global markets took fright at the Federal Reserve's first hint that it might taper its monetary expansion policy.
"Our macrofundamentals remain sound, inflation expectations are anchored, domestic aggregate demand continues to be firm, the banking system is sound, our policy rates are at historic lows and our foreign exchange reserves are ample by most metrics," Tetangco told reporters in an email.
"Nevertheless, should our trade be adversely affected, especially if growth in China slows significantly more than market expectations, we also have room to support growth and manage inflation, given our policy rates are still relatively higher than zero," Tetangco said.
The Philippine central bank held its benchmark interest steady at 4.0 percent since October 2014 even as growth in the first quarter from the previous quarter unexpectedly slowed to a six-year low, confident the government will reverse months of slow spending to jump-start the economy.
"The market has many moving parts. Thus we need to remain vigilant especially for emerging new linkages of risks... and creative in our approach to utilizing macro-prudential measures," Tetangco said.
Felipe Medalla, a member of the central bank's seven-man policymaking Monetary Board, said on Friday policymakers should opt to reduce banks' required reserves - currently at 20 percent - rather than cut its key interest rates to support the economy if inflation falls below one percent.(Reuters)