BSP governor sticks to 75 bps rate hike plan

November 12, 2022 - 11:17 AM
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Bangko Sentral ng Pilipinas
The BSP's main building on Roxas Boulevard, (Reuters file photo)

 Philippines central bank governor Felipe Medalla repeated on Friday he will vote to raise interest rates by 75 points at the monetary authority’s Nov. 17 meeting.

Medalla, who heads the seven-member policy making monetary board, told reporters it was necessary for rates to rise by that magnitude to bring inflation back to target next year.

A rate increase would also help stem the peso’s decline against the dollar as it will prevent interest rate differentials between the United States and the Philippines from narrowing significantly, Medalla said in a recorded speech.

“Keeping a comfortable differential between our policy rates and that of the U.S. lends support to the peso,” Medalla said, adding the central bank was prepared to intervene in the foreign exchange market to smooth volatility.

The BSP’s Nov. 17 meeting comes after data on Thursday showed the Philippine economy grew 7.6% in the third quarter on an annual basis, and 2.9% on a quarterly basis, beating estimates, as domestic demand held up despite soaring inflation.

Annual inflation surged to a near 14-high rate of 7.7% in October, bringing the 10-month average rate to 5.4%, well outside the central bank’s full-year target of 2.0%-4.0% this year.

“The BSP is committed to bringing inflation back to within target range over the medium term,” Medalla said.

—Reporting by Neil Jerome Morales; Editing by Kanupriya Kapoor