Bangko Sentral ng Pilipinas (BSP) said the decision of the US Federal Reserve (Fed) to retain its interest rates was noted for the Central Bank’s monetary policy meeting on Thursday, Feb. 9. The Fed announced on Wednesday that it holds its plans to increase the interest rate but gradual hikes could follow.
“We will note this development at our policy meeting next week, as well as the inflation outlook over the policy horizon,” GMA News reported BSP Governor Amando Tetangco Jr as saying. He added that the Fed holding the interest rate hike was already expected.
Positive US Economy Outlook
“[The Fed’s] relatively positive outlook on the US economy suggested it is on track with policy tightening this year,” Tetangco said. The US economy started to become upbeat as the unemployment rate is already low.
However, uncertainties continue to loom over the US economy as the impact of the economic policies set by the Trump administration has yet to be realized. People from the Central bank are also starting to have concerns with inflation creeping. The promise of boosting government spending could also add concerns.
“With many of his cabinet members still not approved, including (incoming Treasury Secretary Steven) Mnuchin, Trump's occasional remarks and tweets are the only guidance markets can get from the new US administration at the moment,” Shuji Shirota, head of macro strategy group in Tokyo at HSBC, said in another GMA News report.
“The Fed could find itself in a quagmire in the next couple of years if fiscal reform leads to an overheating economy,” Manila Times reported economist Mickey Levy of Berenberg Capital Markets as saying.
Tetangco earlier said it will take a cue from the Fed’s assessment of labor conditions and outlook on inflation. “We will take any relevant information into consideration in our own assessment of domestic inflation dynamics at our policy meeting next week,” The Philippine Daily Inquirer reported Tetangco as saying.
The Monetary Board, BSP’s highest policymaking body, has retained its monetary policy during its last meeting in December in 2016. It reasoned that the policy was set based on the assessment of inflation dynamics and the risks to the inflation outlook over the policy horizon.
The country’s current interest rate is at three percent, with the same rate of projected inflation rate in 2016. However, BSP said on December that the inflation rate could have an upside bias considering higher oil prices and strong domestic economic activity in 2017-2018.
What do you think of BSP's plan to weigh the US Fed's decision to steady interest rates? Let us know in the comments section below.