While those who regularly survey the economic landscape to try to discover when the monetary authorities were likely to make changes in the monetary settings have yet to come to a consensus, the Bangko Sentral ng Pilipinas on Monday said clearly that a sudden and very steep change in the price of oil would compel them to make the appropriate response.
According to BSP Governor Amando M. Tetangco Jr., such a development is at the top of the collective minds of members of the policy-setting monetary board of which he is chairman and in an oblique manner validated the notion that any disorderly reversal of oil prices invites quick and decisive action.
“One thing we keep in the back of our minds is that prices can reverse and often very quickly. If you have been in this market long enough you know that markets tend to get ahead of themselves,” Tetangco said in a recent speaking engagement.
“So, we continue to watch developments in the oil market carefully and how these affect inflation and growth dynamics, to see if there is any need to make adjustments in the stance of policy,” he added. Private economists shared the market’s mixed sentiments on the BSP’s monetary policy leanings.
While most economists say the BSP will likely keep the policy rates steady in the first six months, some said the Monetary Board was likely to cut rates while still others say the Monetary Board will hike rates toward the latter part of the year.
The investment banking powerhouse JPMorgan, for instance, anticipate a 25-basis-point cut in the reverse repurchase or borrowing rate and the special deposit account rate for this year.
Other economists as those at Standard Chartered Bank said the BSP was likely to hike the policy rates by 50 basis points in the last quarter of 2015.
Tetangco also said there are other underlying risks looming in the horizon such as the uncertain growth path for China, the possible delays in the needed structural reforms in the euro zone and in Japan, as well as the geopolitical risks arising from the worsening situation in Russia and the Middle East.
“All of which can heighten financial market volatilities,” Tetangco said.
The BSP will be have their next policy meeting on February 12. This will be the first rate-setting meeting for the year.