Tetangco Says Emerging-Market Rate Moves May Not Be AppropriateKarl Lester M. Yap and Max Estayo
Philippine central bank Governor Amando Tetangco said interest-rate changes by policy makers in emerging economies may increase financial-market volatility as the Federal Reserve tapers bond purchases.
“Tweaking policy rates to address short-term financial market volatility could likely create unintended consequences, and heighten volatility even more,” Tetangco said in an e-mail late yesterday. “Policy-rate changes are not necessarily the most appropriate response at this time.”
India, Turkey, Brazil and South Africa raised borrowing costs last month to bolster their currencies amid a global rout of emerging markets as the Federal Reserve cuts stimulus. Bangko Sentral ng Pilipinas will hold its benchmark rate at a record-low 3.5 percent this week, according to 14 of 15 economists in a Bloomberg News survey.
“Our primary focus for any policy adjustments remains the outlook on domestic inflation over the policy horizon,” Tetangco said. Policy makers target inflation to average 3 percent to 5 percent this year.
The peso fell 0.2 percent to 45.39 per dollar as of 10:48 a.m. in Manila, according to Tullett Prebon Plc. The peso last week slumped to the lowest level in more than three years.
Inflation quickened to 4.1 percent in December, the fastest in two years, and consumer prices are forecast to rise at the same pace in January, according to the median estimate of 14 economists in a Bloomberg survey ahead of a Feb. 5. report.
The central bank sees healthy growth in bank credit continuing, Tetangco said.