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Economy

Following Fed halt, Indonesia and Philippines hold rates

Emerging Asia expects steadier currencies

A teller counts rupiah notes at a money changer in Jakarta. Indonesia's central bank has held key rates steady after hiking them six times last year to shore up the currency.   © Reuters

TOKYO -- The Indonesian and Philippine central banks held back from raising their policy rates Thursday, expecting more stable home currencies and relaxed inflation, after the U.S. Federal Reserve signaled an end to its monetary tightening.

Bank Indonesia kept its seven-day reverse repo rate at 6% and Bangko Sentral ng Pilipinas left the benchmark interest rate on its overnight reverse repurchase facility unchanged at 4.75%.

The moves came the day after the Fed projected zero interest rate hikes for 2019, pointing to signs of an economic slowdown. It halted a tightening program that has driven down emerging-market currencies, forcing Asian monetary authorities into aggressive rate hikes. Brazil's central bank also left key rates in place on Wednesday.

Bank Indonesia's decision marked its fourth consecutive time standing pat as the rupiah holds relatively steady, after hiking rates six times last year in an apparent effort to prop up the currency. Speculation of rate cuts this year has emerged in some corners of the market.

The Philippine central bank has held its benchmark rate steady after raising it five straight times through November. The Fed's pause in rate hikes "gives more flexibility for many emerging markets to keep their monetary policy steady," Deputy Governor Diwa Guinigundo said Thursday.

Philippine President Rodrigo Duterte this month named a new governor for the central bank, Benjamin Diokno, after predecessor Nestor Espenilla died of cancer in February. Diokno has hinted that looser policy, including possible rate cuts, may be an option if inflation continues settling. Growth in the country's consumer price index has faded since November, falling in February to 3.8%, within Manila's target inflation range.

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