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BANGKO
Sentral Governor Amando Tetangco Jr. said Friday what
the monetary board decides on December 20 will depend in
part on what the US Federal Open Market Committee does
at its December 11 rate-setting meeting.
He told
reporters the actions of the US Fed, and major central
banks around the world for that matter, always form part
of the discussions of the monetary board. “We are
mindful of the Fed’s moves and how this would affect the
critical factors which impact inflation that are
specific to the Philippines.”
Market
comments indicate the US Fed was likely to make another
interest-rate reduction as deep as 50 basis points, and
ease down the so-called federal funds rate to just 4
percent.
Such a
reduction was seen to encourage already copious foreign
inflows to emerging markets like the
Philippines
to surge forward even faster than before, presenting
Tetangco with the potential problem of stronger
inflation pressure and further export drops, among
others.
Local
analysts already forecast the Bangko Sentral ng
Pilipinas (BSP) to introduce another interest-rate
reduction to maintain the interest-rate differential and
keep foreign funds from flowing in no more than they
already do.
A surge
in foreign-currency inflows allows the BSP to beef up
further its more than $30- billion stock of
foreign-exchange reserves, but has also forced it to
book tens of billions of pesos in “foreign-exchange
losses” in the first nine months.
But
beyond such losses, interest rate-driven foreign inflows
compel the BSP to purchase them and prevent a sharp
appreciation of the peso, purchases that have to be
quickly done to mop off the extra liquidity from the
system to prevent inflation kicking up.
The
surge in dollar inflows is seen to continue unabated,
however, owing to the advent of the Christmas season
when overseas Filipinos send home more of their earnings
in time for the holiday- spending frenzy. |
