Amando Tetangco, the governor of the Philippine central bank, has joined the debate on how monetary policy should be handled and the effect it would have on emerging markets as capital outflows begin in anticipation of higher interest rates by the US, reported the Financial Times .
Amando Tetangco; however, did not put the blame on the US the way Brazil and India did. Rather, he cautioned his fellow emerging market economies that their own policies of increasing rates in order to deal with volatile currencies would be more harmful, the report said.
In an email sent to Bloomberg, Tetangco said, "Tweaking policy rates to address short-term financial market volatility could likely create unintended consequences, and heighten volatility. Policy-rate changes are not necessarily the most appropriate response at this time."
The comments were given before a rate-setting meeting scheduled on Thursday, February 6, where rates are expected to stay the same for the 16th month in a row. He may also have made the statement to showcase the position of strength of the Philippines, which is considered extraordinary for a country that has long lived with the reputation of being a basket case among emerging economies, the report said.
The central bank governor of India had lashed out at the US last week, citing its "selfish" policies as its economic revival has heralded turmoil to developing markets. What he said also reflected sentiments earlier made by Indonesian finance officials, the report said.
The US Federal Reserve has started to taper its relaxed monetary policy which is part of the reason why emerging market currencies have dropped. Last month, India, Turkey, Brazil and South Africa increased their borrowing costs to protect their currencies, the report said.
The Philippines, meanwhile, is in strong place economically. Citing data from Goldman Sachs, FT reported that the country's current account surplus for 2013 is pegged at 4.1% of its gross domestic product. This is forecasted to increase to 4.3% this year and next year, the report said.
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