BSP: Global financial marts may gain from US Fed plan

MANILA, Philippines - The Bangko Sentral ng Pilipinas said yesterday global financial markets may benefit from the new US Federal Reserve chief’s plan of continuing the reduction in stimulus.

Janet Yellen, who replaced former US Fed Chairman Ben Bernanke, said before a House committee that she would be sustaining the current course of the US central bank.

“As expected, Fed Chair Yellen emphasized the principles of continuity of policy, of being data-dependent of not having a pre-set course on policy,” BSP Governor Amando M. Tetangco Jr. said in a text message.

“This means the markets will be well-served if they are circumspect and if they also watch how the economic data unfold,” he continued.

This is seen to create less uncertainty in financial markets which are suffering from volatility since the announcement of the Fed’s tapering of stimulus.

Yellen, speaking before the US House of Representatives’ Financial Services Committee, said major indicators of economic growth such as the employment figures are still not “back to normal.”

But the new Fed chief showed no inclination of abruptly adjusting the US monetary policy and reiterated the US central bank may take “further measured steps” in decreasing its massive monthly purchases of US Treasuries and mortgage bonds.

The Fed first announced a $10-billion reduction in its $85-billion monthly asset purchases in December, followed by another $10-billion cut announced in January.

Current monthly purchases of the US central bank now amounts to $65 billion, and the Fed in late January said it would likely make “further measured reduction” in its stimulus.

The Fed in late 2009 started injecting money into the US economy through its monthly massive bond purchases.

News of the US central bank’s possible tapering of stimulus sent waves of volatility in global financial markets as early as May last year which prompted sell-offs of assets especially in emerging markets including the Philippines.