US Fed stance on rates remains positive for Philippines

United States monetary officials’ concerns on the impact of global economic developments on the US economy and the Federal Reserve (Fed) rates is seen positive for capital flows to emerging economies like the Philippines.

Minutes of the June 14 and 15 meeting of the Federal Open Market Committee (FOMC) said Fed officials are worried about the flagging growth of the US economy.

Add to this their worries on the would-be result of the June 23 UK referendum that saw most voters favoring the country’s exit from the European Union (EU).

Minutes of the meeting that showed no chance of adjustments in the Fed rates in the near term is positive for capital flows to the Philippines, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said.

”It only means we continue to see ample supply of liquidity in the system,” he said.

According to him, sustained foreign capital flows further increase domestic money supply and will strongly back demand for credit.

“That also means the government can truly leverage on excess liquidity and fund infrastructure projects with local funds,” Guinigundo said.

”With inflation low and stable, interest rates remain favorable, so that investments and public spending can be undertaken at manageable cost,” he added.

Budget Benjamin Diokno earlier said the government will continue to favor domestic fund sources, with a borrowing program ratio of 80:20.

He said they will also maximize all opportunities to borrow to fund more infrastructure projects all over the country.