MANILA, Philippines--The Bangko Sentral Ng Pilipinas (the Philippine central bank) is not keen on matching the US Federal Reserve's steep interest rate cuts, cautious over inflationary pressures from rising oil and food prices while also wary about the dampening effect of a weak US economy on domestic growth.

"The Fed move reflects their continued concern over further weakening of domestic economic activity in the US and an increased concern for the inflation outlook. Although this should have no significant immediate impact on our own policy rate settings, we are mindful of the impact of a prolonged US slowdown on our own economy and the direction of capital flows between developed and emerging markets," BSP Governor Amando Tetangco Jr. said Wednesday.

"At the same time, we continue to monitor developments on oil and commodity price movements, the current key risks to our inflation outlook," he said.

The statement was made after the US Fed slashed its benchmark interest rate by another 75 basis points to 2.25 percent, boosting Wall Street and also attracting more funds to Asia's emerging markets that, in turn, strengthened regional currencies. Despite the widening differential with domestic interest rates that can attract speculative funds, Manila-based traders do not expect the BSP to take any emergency measure to lower its own interest rates.

"Their fundamentals are different from ours. Our inflation is high and financial institutions are in better shape," said Jose Emmanuel Hilado, chief dealer at the country's second biggest bank Banco do Oro Unibank.

"We are not in the same position as the US so there are no drastic measures needed," a foreign banker agreed.

The BSP kept its benchmark overnight borrowing rate unchanged at 5 percent during the Monetary Board's policy-setting meeting last week, indicating caution over escalating inflation. However, it tinkered with its high-yielding special deposit accounts (SDAs) by scrapping the longer tenors of two, three and six months and lowering the rates on the remaining tenors.

"We are hopeful that our recent policy moves would encourage banks to lend, even as other means of fund-raising--such as through the equity market and internally generate funds--remain widely available to corporations," Tetangco said.

Asked whether he thought the scrapping of the long-term SDA tenors would again make the overnight borrowings as the BSP's primary tool, Tetangco said exact amounts of fund movements among the central bank's different tools would be difficult to say at this point, given that part of the motivation for any shift are investor preference and bank risk appetite.

"What is important is that by our recent policy moves, we have, hopefully, created the environment whereby banks' loanable funds would remain adequate to meet the requirements of our economy as it expands, while at the same time ensuring that inflation expectations remain well-anchored," Tetangco said.

The country's inflation rate surged to 5.4 percent in February, rising past the BSP's overnight borrowing rate and the government's target range of 3-5 percent.