Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said Thursday that the central bank is ready to respond to any policy actions the US Federal Reserve might take.
“The Fed authorities have made it very clear that they will try to avoid raising policy rates,” said Diokno during his regular online “GBED Talks”. “And I tend to believe them because as you know – this is my personal view – there’s an election coming next year (mid-term US elections in November 2022) and I don’t think the Fed would like to rock the boat at this time.”
“But in any event, we’re prepared (for) any adjustments in Fed rates because our banks are well-capitalized and they are well-prepared,” added Diokno. “We still have a lot of policy tools in our hands for any event.”
The US Federal Reserve has indicated early on that it could keep zero to very low rates in the next two years.
The BSP has kept its own policy rate to a record low of two percent for the past three policy meetings and has no intention of adjusting the benchmark rate while the economy is in a recovery phase.
Diokno said earlier that he was not worried about the bigger economies’ faster recovery and possible early start towards normalization. He said that such scenarios will not necessarily translate to BSP also raising its own key rate.
“The BSP does not need to calibrate its policy settings in sync with the Fed’s policy decisions,” he emphasized. “The BSP will continue to be data-dependent, guided by its inflation and growth outlook over the policy horizon, as well as the risks, including developments on the external front, on liquidity and financial conditions,” he added. “This will help us determine, not only the type of response that will be needed from monetary authorities, but also the precise timing on when these measures need to be deployed.”