MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has scope to boost demand in response to slower global growth, BSP Governor Amando Tetangco said, signaling officials may start considering easing at next week’s monetary policy meeting.
“The balance of risks to future inflation continues to be tilted slightly to the downside,” Tetangco said in a mobile- phone text message. That gives Bangko Sentral ng Pilipinas “some room for policy maneuver to address possible demand shocks from global developments,” he said.
Asia’s policy makers are increasing efforts to defend their domestic economies from a possible recession in Europe that threatens to exacerbate faltering demand for the region’s exports. Indonesia cut its benchmark interest rate this month to a record-low, while others including the Philippines and Malaysia have refrained from further increasing borrowing costs.
“In an environment where the global growth outlook is deteriorating, central banks are now more biased towards supporting growth,” said Prakriti Sofat, a Singapore-based economist at Barclays Capital. “The BSP is watching global developments closely. Manageable inflation gives them flexibility to make an action if the need arises.”
The peso has fallen more than 2 percent this month, declining along with most Asian currencies as Europe’s worsening debt crisis roils global financial markets and prompts investors to shun emerging-market assets. The Philippine Stock Exchange Index dropped for seven straight days before rising yesterday.
Policy makers are watching the impact of “fragile markets in Europe, changes in political leadership in the Middle East, signs of slower growth in China” on “domestic aggregate demand and domestic prices to ensure BSP policy settings remain appropriate,” Tetangco said. Inflation is forecast to be within target this year and “manageable” in 2012 and 2013, he said.
The World Bank forecast earlier this month that growth in Asia will slow next year and said governments should focus on boosting their economies by increasing spending.
“Policy makers will need to walk a fine line guarding against the short-term risks to growth and the lingering vulnerabilities associated with a still-buoyant, if not overheated, economy,” the World Bank said in a Nov. 22 report.
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