What Analysts Are Saying About New Philippine Central Bank Head

(Bloomberg) -- The surprise appointment of Philippine Budget Secretary Benjamin Diokno as central bank governor may put pressure on the currency on concern monetary policy might be influenced by the government, analysts said.

The peso slumped 1 percent to 52.24 per dollar in Manila, its biggest drop since August 2013 and leading declines among emerging-market currencies. Some central bank watchers had expected President Rodrigo Duterte to name one of the three deputy governors, or someone from the banking sector to succeed Nestor Espenilla, who died in February after a battle with cancer.

What Analysts Are Saying About New Philippine Central Bank Head

“It is seen negative in view of the central bank’s independence as the new governor was selected from the government side,” said Masakatsu Fukaya, an emerging-market currency trader at Mizuho Bank Ltd. in Tokyo. “There could be some speculation the central bank may shift to easy monetary policy especially as data today showed inflation slowed in February more than expected.”

What Analysts Are Saying About New Philippine Central Bank Head

Here’s what other analysts are saying:

  • Alan Atienza (Treasurer at Philippine Bank of Communications in Manila)
    • Based on his recent stint as budget secretary, his inclination will be toward policies that will support or enhance economic growth
    • “We should see reserve and rate cuts this year that will support and fund the government’s ballooning budget deficit”
  • Manny Cruz (Head of research at Papa Securities Corp. in Manila)
    • “We have a governor who is probably more aggressive than the other contenders when it comes to cutting interest rates. His presence raises the possibility of interest-rate cuts, particularly if inflation slows to below 3 percent”
    • He will probably lean more toward an interest-rate cut than a reduction in the reserve requirement ratio because a rate reduction will have a quicker effect in boosting economic growth
    • Diokno has consistently communicated as budget secretary that his primary aim is to boost economic growth, keep the Philippines on higher growth path and that high inflation is tolerable as long as the economy is growing correspondingly
  • Mike Ricafort (Economist at Rizal Commercial Banking Corp. in Manila)
    • Markets will be anticipating moves, or even signals or hints, on both policy rates and large banks’ reserve requirement ratio
    • “Mr. Diokno has been a seasoned member or integral part of the country’s economic team in the current and past administrations over the years. He has been very familiar with key economic data and various policy implications”
    • Diokno’s important policy priorities include sustainable economic growth while ensuring price stability in the coming years
  • Robert Dan Roces (Chief economist at Security Bank Corp. in Manila)
    • He has advocated better liquidity in the market. “Probably, we will see moves in that direction”
    • As an outsider coming to the central bank, he will see more cohesiveness in terms of coordination with the government’s economic agencies
  • Jonathan Ravelas (Chief market strategist at BDO Unibank Inc. in Manila)
    • He has been a good communicator, transparent and has shown discipline in staying within target and budget
    • The challenge he faces is assure investors that the central bank will stay independent and faithful to its critical role that it is the glue holding the economy together
  • Christian de Guzman (Vice president at Moody’s Investors Service in Singapore)
    • Governor Diokno is leaving the Department of Budget and Management at a time with somewhat of an uncertain outlook for spending
    • Diokno has the requisite qualifications both academic and professional to continue to steer the BSP in a good way
    • “BSP’s monetary decisions are not reflective of one single person. Monetary policy is dictated by the board and as far as we know the broad membership remains intact apart from the change in the governor”

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