MANILA, Philippines - The Bangko Sentral ng Pilipinas said yesterday the extent and timing of further policy actions will follow European Central Bank actions in the future.
BSP Deputy Governor Diwa C. Guinigundo made the comment after ECB president Mario Draghi last week told a conference he will use all means to keep prices stable. Expectations then rose for policy actions from the ECB particularly for quantitative easing, an unconventional tool used by central banks to stimulate the economy.
These policy actions from the ECB may act as a counterweight to the US Federal Reserve’s unwinding of stimulus and eventual adjustment in interest rates, Guinigundo said.
“From a monetary policy standpoint, such a counterweight could moderate the magnitude and speed of necessary readjustment of domestic monetary policy relative to what may be imposed by the US Fed tightening mode,” Guinigundo said in an e-mail to The STAR.
“We need to read more data points, and watch out for any red flags along the way,” he said.
Guinigundo said the central bank would be monitoring possible actions from the ECB, which has been pressured to act in order to spur growth in the euro zone.
“We have to evaluate the potential impact of ECB easing on global markets and capital flows before we can ascertain its policy implications,” Guinigundo said.
The BSP in July raised key policy rates by 25 basis points each to ensure inflation expectations remain anchored. The move also came ahead of eventual normalization of monetary policy in other economies.
The policymaking Monetary Board will revisit policy settings on Sept. 11.
During a central bank conference in Jackson Hole last Aug. 22, ECB’s Draghi told the audience “all available instruments needed to ensure price stability” as inflation continued to drop in the euro zone.
“Given the soft outlook of the Euro economies and markets, it is indeed likely that ECB might consider its own version of quantitative easing to help restart their stalled economies out of recessionary rut,” Guinigundo said.