Key rates buffer

MANILA-The high liquidity in the Philippines will partly cushion the domestic financial market from the impact of any possible tightening in financial conditions once the Federal Reserve starts hiking its key rates.

Based on the minutes of the July 29-30, 2014 meeting of the Federal Open Market Committee, many US monetary officials are confident that progress in the US economy are enough for the Fed to start hiking its key rates, which to date is at record-low of zero to 0.25 percent.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the BSP will continue to implement a “disciplined macroeconomic policies and prudent financial sector oversight” to “keep (the) house in order” pointing out that “the best defense is a good offense.”

He said Philippine monetary officials see “that there will continue to be broad stability in funding conditions” in the country once the Fed rates increase.

He explained that “rising rates will impact primarily on financial market volatility but we don’t expect significant tightening of financial conditions because of ample peso and FX (foreign exchange) liquidity.”

He also cited that “some counterweight is being exerted by the accommodative monetary policies of the BOJ (Bank of Japan) and the ECB (European Central Bank),” referring to the stimulus program being implemented by the central banks.