Bloomberg News

Philippine Central Plans to ‘Balance’ Response to Capital Flows

October 19, 2012

Diwa Guinigundo, deputy governor of the Philippine central bank, comments on factors it will take into account at its monetary policy meeting on Oct. 25.

Guinigundo spoke at a conference in Manila today.

On indications from financial markets:

“You have to look at monetary and price conditions. Financial markets give you telltale signs. Is there tightness in liquidity in the market? Are interest rates posing constraint to capital formation? These are the things that one should ask next Thursday.

‘‘The market is very liquid so even if there’s incremental increase in demand for local borrowing, I don’t think that would be enough to push interest rates to unreasonably high levels.

‘‘We will coordinate with fiscal authorities to balance the response to surges of capital flows.’’

On factors other than inflation that can determine rates:

‘‘You don’t just look at inflation or one or two indicators. You have to look at macro-economy in general. While inflation is very manageable, does that authorize you to reduce your policy rates? Or if inflation rate is nearing the upper end of the target, should you immediately tighten monetary policy? We’ll have to look at the global economy and of course the domestic economy. Inflows are one of the risks.”

To contact the reporter on this story: Norman P. Aquino in Manila at

To contact the editor responsible for this story: Reinie Booysen at

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