BSP ready to adjust rates

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is ready to adjust its policy stance if necessary to cope with any fallout arising from a reduction in the US Fed’s massive stimulus program.

“The BSP stands ready to make refinements to existing macroprudential measures or deploy new ones as necessary,” BSP Governor Amando Tetangco Jr. told participants of the Philippine Economic Briefing.

“We’re also ready to make adjustments to the stance of policy as inflation outlook would allow in order to support growth,” he added.

Tetangco said risks abroad continue to create uncertainty and volatility in local financial markets.

 â€œThe main risks are the change in market perception of the timing of the change in interest rates in the US... the geopolitical setting in Syria... and the weakening in the prospects of our trading partners,” Tetangco said.

At the same time, he noted the central bank remains watchful of local developments to ensure the strong economic growth is sustained.

The economy expanded by 7.5 percent in the second quarter, the fastest growth pace in Southeast Asia. This brought first half growth to 7.6 percent, already above the government’s target of a six-to seven- percent expansion.

Tetangco cited measures the BSP has already implemented last year such as restrictions on the Special Deposit Accounts (SDA) and tighter regulations on the property sector.

“Our approach has always been to use a set of measures in order to address the challenges that we face, particularly rising from significant inflows of capital,” Tetangco said.

 â€œThe surge in capital to the country tend to expand domestic liquidity and if not managed properly, can lead to asset price bubbles,” he said.

To counter this, one of the macroprudential measures that the BSP used involves the prohibition of foreign funds going into the SDA. Tetangco said the central bank wanted to keep foreign funds out of the facility because the SDA is a monetary instrument for mopping up excess liquidity in the system, and not an investment vehicle.

Meanwhile, the BSP expanded the definition of real estate exposure to better safeguard the property sector from asset price bubbles, Tetangco said.

“These are the things that we have done so far... There are still a number of options that we have but at this point, we have not decided on what options we would take but there are other tools that we could implement if there is a need for it,” Tetangco said.