MANILA, - The Bangko Sentral ng Pilipinas has advised market players to remain cautious despite the country’s sound economic fundamentals, marked by sustained strong growth and healthy external position.
“Clearly, the Philippines is in a good spot, and the prospects are bright. Our sound fundamental story is intact. This should not, however, lull us to complacency,” central bank Governor Amando M. Tetangco Jr. said in a recent speech.
“Use this time of low volatility wisely – take stock of your positions and carefully reassess these against the risks,” he said.
Tetangco said that despite low volatility seen in global financial markets, risks remain such as the monetary policy normalization in advanced economies which may result in shifts in investor sentiments.
At the same time, the BSP chief pointed out geopolitical risks that may increase commodity prices, and natural disasters hitting the country that may cause supply shocks and translate to an uptick in domestic inflation.
“It is a fundamental truth – in everything we face, there are two circles of concern that confront us: those concerns that are within your control, and those outside of your control. Quite often, the latter circle is larger than the former,” Tetangco said.
“As market practitioners, you need to be mindful of these two circles. What can you control? Certainly your risk appetite. Controlling this when greed gets the better of you is very difficult. So in a period of low volatility such as what we have been experiencing, practice the discipline of setting limits,” he said.
Tetangco further said that this “discipline” will help market players avoid the perils of “chasing the market” and may even lead to other opportunities they can take advantage of.
“Discipline set during the sober low volatility period will guide you when you are confronted with factors that are not within your control, especially during a frenzied high volatility period,” he said.
“The BSP practices the same discipline. For the things that are under the BSP’s control, the BSP takes conscious effort to act on these. For those that are not – we sharpen our surveillance, monitoring and analysis,” he added.
Moreover, Tetangco said the central bank works together with other government agencies, and also with counterparts in the region and the world.
“You can therefore expect the BSP to continue to keep our ears on the ground for inflation impulses and changes in inflation dynamics, act preemptively as appropriate when we see financial stability pressures rising, keep a market-determined exchange rate, and use all monetary and macroprudential tools under our disposal to shield the gains we have achieved so far,” Tetangco said.