BSP expects stable capital flows

Emerging markets including the Philippines should see more stability in capital flows after Greece confirmed it repaid part of its loan last week, the Bangko Sentral ng Pilipinas said.

“For EMEs (emerging markets and economies), this can mean enhanced stability in capital flows, as one element of uncertainty is peeled away,” BSP Governor Amando M. Tetangco Jr. said over the weekend.

“Consequently, monetary authorities, including in the Philippines, can better concentrate on factors affecting inflation other than volatility in financial markets,” he said.

Greece last week confirmed it made a 450-million euro payment to the International Monetary Fund, lifting markets across the globe.

The move was made despite the country being severely cash- strapped and while this gave partial relief to investors worldwide, doubts remain on whether Greece could push through with economic reforms before its funds eventually dry up.

“An improvement in the economic prospects in the troubled countries in Europe should be overall positive for global growth, and in turn, should help accelerate normalization in monetary policies across the globe,” Tetangco said.

Developments in the global front are among the things the BSP watches out for as they may significantly impact domestic inflation and outlook.

The central bank in March kept its key policy rates steady for the fourth consecutive meeting as inflation expectations

continued to fall within the two to four percent band for this year and the next.

Inflation this year has been forecast to average 2.2 percent, while next year’s average is seen at 2.5 percent.

The BSP last month said the risks to inflation continue to be broadly-balanced, with upside price pressures coming from the pending petitions for utility rate hikes and the possible power shortages seen this year.

The uneven global growth has also been tagged as a risk as this might cause an uptick in commodity prices.

Last year, the overnight borrowing and overnight lending rates were hiked for a total of 50 basis points during the third quarter to ensure inflation would remain within the target band.

The BSP is set to revisit policy settings on May 14.