KEEPING the monetary settings where they are at present and refusing to use the interest-rate weapon to quell rising price pressures should help the Philippines achieve its growth target this year, latest readings by economists at ING Bank show.
ING Bank regional economist Tim Condon favored a more accommodative policy environment was needed for the economy to expand as projected given the tightening measures the central bank adopted earlier to ensure sustained growth this year.
“We think more policy accommodation will be needed to hit the government’s targets of 6.5 [percent] to 7.5 percent for 2014 and 7 [percent] to 8 percent for 2015,” Condon said.
Condon was also of the view the downside inflation surprise in September suggested a pause in the tightening cycle, joining several other economists from both the public and private sector who held similar views.
According to Condon, any hint of a Bangko Sentral ng Pilipinas (BSP) tightening cycle by allowing domestic interest rates to lift decreases the attractiveness of peso-denominated assets now in the markets.
Joey Cuyegkeng, ING Bank economist in Manila, shared the same view, saying the appreciation of the peso against the dollar remains limited.
Cuyegkeng attributed the minimal appreciation of the peso to the “threat of BSP tightening keeping offshore investors cautious in taking local currency positions in the Philippine financial markets.”
“Thus, if there are portfolio inflows, it would be limited and consequently the peso would be mildly stronger,” Cuyegkeng said.
The peso has been trading at the upper band of the 44 territory in recent days following the strengthening of the US dollar against regional currencies.
The central bank is scheduled to meet on October 23 to decide which way interest rates would tread over the next 18 to 24 months down the line.
Meanwhile, the Philippines and other countries in the region have forged an agreement to further foster regional financial stability through regular and objective surveillances on their financial dynamics.
In a statement released just recently, the BSP confirmed that central bank Governor Amando M. Tetangco Jr. attended the ceremony and signed, for and on behalf of the Philippines, the agreement establishing the Asean +3 macroeconomic research office (Amro).
The signatories were the governments of the Asean+3 member-countries Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan and South Korea. The Hong Kong Special Administrative Region also signed the deal in Washington, D.C.