MANILA: Central banks in Indonesia and the Philippines held their key interest rates steady to help entrench economic recoveries that are picking up pace as South-East Asia’s worst Covid outbreaks recede.

       Bangko Sentral ng Pilipinas left the benchmark rate at 2% yesterday, as predicted by all 20 economists in a Bloomberg survey.

       Minutes later, Bank Indonesia (BI) held its key rate at 3.5%, as all 27 economists surveyed expected, and pledged to keep it there until it sees signs that inflation is picking up.

       Monetary authorities in both countries will be watching closely for any emerging-market fallout from the Federal Reserve’s (Fed) decision Wednesday to speed up its exit from pandemic-era policies that supported the United States economy.

       The two central banks can bide their time for now as robust external buffers reduce the urgency to move in lockstep with the Fed.

       “Don’t jump to the conclusion that if the Fed fund rate increases, then the BI rate will follow. That is not true,” BI governor Perry Warjiyo said in a briefing in Jakarta.

       When it’s time to start tightening the central bank will begin by gradually reducing liquidity, and rates “will be determined by our assessment of inflation and economic growth in 2022 until 2024”.

       Warjiyo said BI would continue using macroprudential measures to support growth, but that the focus of monetary policy next year would be “pro-stability.”

       That’s a change from the “pro-growth” stance the bank has pursued for most of 2021, but reiterates a message Warjiyo has delivered recently.

       Still, despite the various measures BI has taken to lower lending rates, a more hawkish stance by the Fed could dry up global liquidity and lead to higher borrowing costs, according to Harry Su, head of equity capital markets at Samuel International.

       The yield on Indonesia’s 10-year bonds rose two basis points after the decision to 6.42%, while the rupiah was 0.1% weaker at 14,343 to the dollar and the benchmark stock index slid 0.5% at the market close in Jakarta.

       “BI looks set to maintain its two-pronged focus on supporting currency stability and economic growth after it kept its policy rate unchanged yesterday.

       “We think it would use interest rate adjustments if needed for the former and a looser macroprudential policy for the latter,” said Tamara Mast Henderson, Bloomberg’s Asean economist. — Bloomberg