MANILA, Philippines - The policy rate hike announced last month has not resulted in any increase in capital entering the country, the Bangko Sentral ng Pilipinas said.
“So far, we have not seen any incremental wave of capital flows following the BSP’s policy rate hike,” BSP Deputy Governor Diwa C. Guinigundo said in an e-mail.
The BSP’s policymaking Monetary Board on July 31 hiked the overnight borrowing and overnight lending rates by 25 basis points each, the first time they were adjusted since October 2012.
The move was to ensure inflation will remain within the three to five percent target this year and the two to four percent range in 2015.
“The recovery in capital flows started as early as the second quarter through August 2014,” Guinigundo said,.
“Cumulative net outflows are now down to less than a billion dollars compared to more than $2 billion in the first quarter,” he said.
Latest BSP data showed that net portfolio investments recorded outflows of $938.61 million as of July 25, a reversal of the $2.39 billion net inflows recorded in the same period last year.
This was largely a result of a $1.84 billion net outflow recorded in January alone, as investors repatriated their capital from emerging markets including the Philippines following the start of the US central bank’s reduction in massive monthly asset purchases.
“While interest rate differential is an important element in portfolio decision of foreign investors, the overall macroeconomic picture is more important,” Guinigundo said.
“After their knee jerk reaction to the Fed (US Federal Reserve) taper tantrum, investors have realized that the Philippines is indeed an investment grade destination,” Guinigundo said.