MANILA — The US Federal Reserve may hike interest rate by just 25 basis points during its policy setting meeting this March amid contagion fears following the collapse of Silicon Valley Bank, Bangko Sentral ng PIlipinas Gov. Felipe Medalla said on Friday.
The Federal Reserve has been raising rates aggressively since last year to tame inflation.
“My guess is that the Fed will still raise its policy rate by 25 basis points. The Fed has done enough to contain contagion," Medalla said.
Medalla, however, said while the US Federal Reserve’s rate hikes have an impact on money flows in and out of the Philippines, especially when fixed income assets here are offering far smaller yields compared to American assets, Philippine monetary policy would still focus on domestic conditions including the state of local inflation.
Inflation slightly eased to 8.6 percent in February, remaining above the government target of 2 to 4 percent.
Medalla earlier assured the public that the Philippine banking system remained sound and resilient based on stress tests that showed banks' capital would hold even under extreme scenarios.
The BSP Monetary Board is set to meet on March 23.
— With a report from Warren De Guzman, ABS-CBN News