CEBU, Philippines (Updated 4:19 p.m.) — The Philippine central bank has no reason to raise interest rates further as domestic inflation is easing, the country’s finance minister said ahead of a May 18 monetary policy meeting.
Finance Secretary Benjamin Diokno reiterated his stance against a rate hike, but said he was just expressing his opinion and was only one of seven monetary board members who will vote during Thursday’s meeting.
“I’m for a pause, that’s my opinion. Inflation is going down,” Diokno said.
While the Bangko Sentral ng Pilipinas (BSP) expected inflation to ease below 4% by the fourth quarter, there was no solid consensus for a pause on May 18, with some economists penciling in a hike before the central bank takes a break from policy tightening.
BSP Governor Felipe Medalla, in a press conference in the central Philippines province of Cebu, said “next year will be a year of good growth and good inflation”.
The BSP has raised rates by a total of 425 basis points since May last year to fight inflation, the full impact of which Diokno said has yet to be absorbed by the economy, considering that monetary policy often works with a long lag.
Officials have said the central bank’s aggressive tightening could dampen domestic demand, which slowed for a fourth straight month in the first quarter and contributed to the economy’s slower annual expansion in the first three months of the year.
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The International Monetary Fund said on Friday that with risks to inflation remaining on the upside, “a continued tightening bias may be appropriate until inflation falls decisively within the 2-4% target range”.
Philippine annual inflation eased for a third straight month in April to 6.6%, and the economic planning ministry said it appeared to have hit its peak.
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—Reporting by Enrico Dela Cruz and Neil Jerome Morales; Editing by Jane Merriman, Kanupriya Kapoor
