Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. dubbed as positive for the medium term the latest cut in the European Central Bank’s (ECB) interest rates and expansion of its quantitative easing program.
ECB announced on Thursday morning (Manila time) its decision to cut its main interest rate to zero percent from 0.05 percent and bank deposit rate to -0.4 percent from -0.3 percent as well as the expansion to 80 billion euro from 60 billion euro of its monthly bond purchases.
Tetangco, in a text message to reporters on Friday, noted that ECB President Mario Draghi “described the moves as comprehensive.”
He, however, cited that ”what may have received more attention from the market was the intimation that the ECB may be nearing the end of easing cycle.”
This after Draghi suggested that there would be no more rate cuts in the pipeline.
Tetangco said the ”timing of the policy action and the subsequent statement may have stirred markets somewhat.”
Despite this, Tetangco remains optimistic on the latest ECB decision.
“To the extent these moves would translate to growth these should be medium term positive for global growth and the markets, including the peso,” he said.
In terms of its impact on the BSP’s policy stance, Tetangco said the Philippine central bank do not have to make the same decision.
”We watch developments in policy stances of other jurisdictions but don’t have to move in sync with other policy makers. There are other factors we look at, including oil, El Niño effects, for instance,” he added.
The BSP last hiked its key interest rates in September 2014 to rein in inflation and prevent it from surpassing the upper end of the government’s three to five percent target that year.
In 2014, the BSP increased by a total of 50 basis points its key rates, bringing the overnight borrowing or reverse repurchase (RRP) rates to four percent and the overnight lending or repurchase (RP) rate to six percent. (PNA)
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