BSP prepares for inflows
MANILA - The Bangko Sentral ng Pilipinas (BSP) said it has enough tools to manage a surge in portfolio funds after the US Federal Reserve decided to stick to its bond buying program.
The Fed action should revive interest in emerging markets like the Philippines, BSP Governor Amando M. Tetangco Jr. said in a text message.
‘‘We have the macroprudential tools in place to manage surges in capital inflows consistent with our price and financial stability objectives,” he added.
The Fed kept its existing policy of buying mortgage-backed and Treasury securities monthly, a move that took markets by surprise as analysts have expected it to start reducing its massive bond buying program.
The announcement gave a boost to emerging markets as demand for higher-yielding assets rose.
“As is our policy, the BSP will maintain a presence in the foreign exchange market if, in our assessment, there is excessive exuberance in the financial markets especially today because of the unexpected Fed announcement. We will also remain watchful of developments in the real asset markets,” Tetangco said.
At the same time, the BSP chief said the Fed announcement will also be positive for the Philippine economy if such will support US growth due to trade, remittances and investments ties.
“To the extent the Fed action helps to ensure the incipient US growth is not derailed, it should also be positive for our own growth prospects,” Tetangco said.
The Fed has held overnight interest rates near zero since late 2008 and has more than tripled its balance sheet to more than $3.6 trillion through three rounds of bond buying aimed at holding borrowing costs down.
The decision not to taper bond purchases faced a single dissent. Kansas City Federal Reserve Bank President Esther George, who has dissented at every Fed policy meeting this year, repeated her concerns that the low-rate policy could lead to asset bubbles.
Fed Governor Sarah Raskin, who has been nominated to take a top job at the US Treasury, did not participate in the meeting.