Economy 2 MIN READ

UPDATE 1-Philippine does not have to match Fed, but watching risks

March 17, 2022By Reuters says it has tools to address market volatility bank to review monetary policy on March 24

Recasts, adds comments on liquidity tools, inflation risks

The Philippines central bank does not have to follow the United States Federal Reserve’s lead in raising interest rates but is closely monitoring inflation risks, its governor said on Thursday.

“We do not necessarily have to move in pace with the monetary policy adjustments of the U.S. Fed,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in a media briefing, after the Fed on Wednesday raised rates for the first time since 2018. nL2N2VI1CD

Diokno, in remarks ahead of the BSP’s policy meeting on March 24, also said the central bank has liquidity-enhancing and management tools to deal with any short-term volatility caused by a potential tightening of financial conditions.

He said future policy decisions of the BSP, which has kept key interest rates unchanged at a record low of 2% PHCBIR=ECI since November 2020, will continue to be data-driven and based on domestic developments.

Philippine inflation held steady at a 16-month low of 3% in February as higher energy costs were offset by lower prices of some food items. nL2N2V7049

But fuel costs have shot up dramatically this month following Russia’s invasion of Ukraine, triggering petitions for fare and wage hikes in the Philippines.

Diokno reiterated the need to closely watch such emerging risks and arrest so-called second-round effects on inflation, or the indirect impact of high energy prices, such as possible wage adjustments.

President Rodrigo Duterte has rejected calls from some sectors and lawmakers to suspend the excise tax on fuel products because of the huge revenue losses the government would incur.

But the government has approved a package of fuel subsidies for certain sectors and cash aid for the poorest families to ease the impact of high oil prices. It has also proposed a four-day work week to reduce costs for employers and workers.

(Reporting by Enrico Dela Cruz; Editing by Kanupriya Kapoor
Editing by Ed Davies and Kanupriya Kapoor)


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