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YOKOHAMA, Japan (Reuters) - The Philippines Central Bank Deputy Governor Diwa Guinigundo said he sees no need to adjust monetary policy because concerns about overheating are not warranted and consumer prices are expected to rise at a steady rate.
The central bank's 3 percent policy rate may seem low, but policy settings are appropriate given that inflation is forecast to slow slightly from next year, Guinigundo said in an interview with Reuters.
The central bank is also prepared to let the peso "adjust" versus the dollar in response to U.S. Federal Reserve rate hikes, because the risk of capital flight is low and a weaker peso has less impact on inflation now than previously, he said.
"We are in a Goldilocks situation in the sense that we have high growth, and low and stable inflation," Guinigundo said on Sunday on the sidelines of an Asian Development Bank meeting.
"Fears about overheating are not well placed. We don't see the urgent need to start tweaking the policy rate or adjusting other levers of monetary policy."
The central bank will meet on May 11 to review policy. It has kept its main policy rate unchanged since it raised interest rates by 25 basis points in September 2014.
Guinigundo is a candidate to become the next central bank governor once Amando Tetangco, the current governor, steps down in July. Guinigundo on Sunday reiterated his interest in the role but said it is up to President Rodrigo Duterte to decide.
The Philippines is among the world's fastest growing economies, with gross domestic product expanding by 6.8 percent in 2016, a three-year high.
The annual rate of consumer price inflation was unchanged at 3.4 percent in April, slightly below economists' forecast for an increase to 3.5 percent, and within the central bank's 2 percent to 4 percent target for the year.
Consumer prices are forecast to rise 3.4 percent this year but then slow to a 3 percent increase in 2018, showing price pressure remains contained, Guinigundo said.
The deputy governor dismissed concerns that U.S. Federal Reserve interest rate hikes could trigger disruptive capital outflows from the Philippines and other emerging economies.
The Philippines should allow its currency to respond naturally to higher U.S. rates, partly because inflationary risks are not that high, Guinigundo said.
Guinigundo was also supportive of the Duterte administration's plan to increase infrastructure spending to as much as 7 percent of gross domestic product (GDP) by the end of its six-year term in 2022 from 5.2 percent of GDP this year.
To fund the plan, the government has asked Congress to approve a package of tax measures to raise funds, showing the government remains committed to fiscal discipline, Guinigundo said.
Reporting by Stanley White; Editing by Christian Schmollinger