BSP sees markets stable ahead of May 8 policy meet

Posted at 05/02/14 2:20 PM

MANILA - The Philippines' central bank chief said he expects domestic financial markets to be stable ahead of its policy meeting next week, after the U.S. Federal Reserve announced another cut in its massive bond-buying stimulus.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said the latest Fed action will be taken into consideration when the BSP reviews policy on May 8.

"For now, this should keep the domestic financial markets fairly stable," Tetangco said of the Fed's $10 billion reduction to its monthly bond buying program while keeping fund rates unchanged until further improvements in U.S. inflation and employment are seen.

"We will take this in consideration during our own policy meeting," he told reporters in a mobile text message, adding that the Fed's actual minutes would be "interesting" for monetary authorities.

The Fed's heralding an end to its stimulus measures sank Manila's benchmark equity index from record highs last year.

The index has since recovered and is up around 14 percent so far this year, while the peso is up around 1.6 percent.

The central bank has said it is ready to impose measures to stem liquidity growth and dampen inflationary pressures, but has noted there is no pre-set course for policy normalization.

Recent hints by central bank officials point to increased caution over strong money supply growth, which has continued to hover around a record 37 percent.

On March 27, the central bank kept policy rates steady but raised banks' reserve requirement ratio by 1 percentage point to siphon liquidity in the financial system, a move seen by financial markets as signalling the start of a policy tightening cycle.