Bloomberg News

Tetangco Says Cooling Prices May Allow Asia to Ease Policy

October 26, 2011

(Updates with peso, bonds in fifth paragraph.)

Oct. 26 (Bloomberg) -- Asia’s emerging economies may be able to lower interest rates and boost spending as inflation slows, helping the region remain “a bright spot,” Philippine central bank Governor Amando Tetangco said.

“Asian emerging-market economies have policy space for debt spending and accommodative policy to stimulate the economy,” Tetangco said in a speech in Manila late yesterday. “Pressures to prices have eased, allowing for room to support growth.”

Asian policy makers have shifted their focus to shielding their economies as a potential Greek default and a faltering U.S. recovery threaten to push the world into another recession. The Philippines kept its benchmark interest rate unchanged for a fourth meeting last week, joining nations from Indonesia to South Korea in choosing to protect growth.

Philippine President Benigno Aquino unveiled a 72 billion- peso ($1.7 billion) stimulus plan this month while Thailand kept rates unchanged for the first time this year on Oct. 19, ending its longest series of increases since 2006.

Benchmark 20-year bonds due July 2031 rose a third day, pushing the yield to a two-week low, according to Tradition Financial Services. The peso dropped, ending two days of gains, according to Tullett Prebon Plc.

Trade and investment are supporting Asian exports and countries with a large consumer base such as the Philippines will prove resilient, Tetangco said. The nation’s inflation is manageable even as consumer spending that is backed by remittances from migrant Filipino workers remains solid, he said.

“The appropriate policy has been able to strike a balance between supporting growth and keeping inflation at bay,” Tetangco said. The central bank’s “assessment of manageable inflation environment continues to support settings.”

The Philippine central bank will remain mindful of risks to inflation, such as uneven capital flows that may fuel volatility in foreign-exchange markets, Tetangco said, adding that monetary authorities can manage the flows.

--With assistance from Norman P. Aquino, Clarissa Batino and Cecilia Yap in Manila. Editors: Jeffrey Donovan, Eddie Buckle

To contact the reporters on this story: Max Estayo in Manila at mestayo@bloomberg.net; Karl Lester M. Yap in Manila at kyap5@bloomberg.net

To contact the editor responsible for this story: Simone Meier at smeier@bloomberg.net


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