Weakness of the Philippine peso and the local bourse after the Federal Reserve's decision to hike key rates Thursday morning (Manila time) is as expected but Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. hopes this movement will be limited as the year ends.
After the two-day meeting of the Federal Open Market Committee (FOMC) on Dec. 13-14, the Fed increased key rates by 25 basis points to between 0.5 percent and 0.75 percent, which has been widely expected by markets, after noting sustained economic improvements.
For the day, the peso opened at 49.90, weaker than the previous day's 49.82. It has traded between 49.95 and 49.88 as of 10:10 a.m.
Also, all indices in the local bourse are in the red, with the main index, the Philippine Stock Exchange index (PSEi), down by 1.17 percent, or 81.07 points, to 6,847.7 points as of 10:32 a.m.
Tetangco, in a text message to reporters, cited that since markets have priced in a 25 basis points increase in the Fed's key rates the focus would be more on the "Fed dot plot, which shows a more "hawkish" Fed than market first expected."
He, on the other hand, noted that "even then markets would likely not dwell too much on that because market also knows that those dots do change over time."
"I am hopeful the recent US dollar-Philippine peso movements have also factored these in and that any further movement during the balance of the year would only just be small refinements to bank positions," he said.
"Going forward, we'll watch for indicators on how global markets judge the potential expansionary US fiscal policy, its impact on global demand, prices of global commodities and how these would affect our own domestic inflation and growth dynamics," he added.
The BSP's policy-making Monetary Board (MB) will have its own rate setting meet Thursday next week, Dec. 22, and it is widely expected to keep key rates steady until at least the second quarter of 2017.
Source: Philippines News Agency