BSP ready to counter geopolitical volatilities

By Kathleen A. Martin, The Philippine Star

Posted at Aug 13 2014 07:30 AM | Updated as of Aug 13 2014 03:30 PM

MANILA - The Bangko Sentral ng Pilipinas said yesterday it is ready to counter volatilities arising from the geopolitical tensions between Russia and the West.

“We are ready for short-term volatilities arising from shifts in investor sentiment that could lead to volatility in capital flows. We have the tools,” BSP Governor Amando M. Tetangco Jr. said.

“For the medium term, we will similarly act as necessary. We will deploy tools as appropriate, distinguishing impulses that have short or medium term effects,” he said.

Russia last week announced that it plans to ban all food imports from the United States and all fruits and vegetables from Europe. The move came after the US and European Union introduced more measures against Russia amid the latter’s role in the Ukraine crisis.

“Geopolitical issues in general increase financial market and commodity price volatility. If these persist, they may cause shifts in risk perception of global investors,” Tetangco said.

The BSP chief said that following Russia’s announcement of counter-sanctions last week, declines have been observed in the Philippine Stock Exchange index and the peso.

However, he stressed “we don’t see the volatilities from these as persisting given that our domestic fundamentals remain strong.”

“Nevertheless, we continue to be mindful of the geopolitical environment and will not hesitate to adjust policy levers should these begin to have a more significant effect on commodity supply chains and global trade, and on global prices and domestic inflation expectations over the policy horizon,” Tetangco said.