Philippines may not move in lockstep with Fed on rates

June 15, 2023 - 11:48 AM
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BSP building
Facade of the Bangko Sentral ng Pilipinas in Manila. (BSP/Released)

The U.S. Federal Reserve’s monetary policy actions now are seen less of a factor for the Philippine central bank’s decision-making, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco Dakila Jr said on Thursday.

“Even if the Fed decides to pause from its policy tightening, which it did this morning, we may not move in complete lockstep if domestic inflation warrants a different response,” he said, speaking at a livestreamed investor briefing in Singapore.

While Dakila reiterated the BSP’s forecast that inflation will ease to within the official 2%-4% target range starting in the fourth quarter, he noted that the Fed was “still quite hawkish and emphasized the continued vigilance and the possibility of further adjustments in monetary policy”.

The BSP kept its benchmark interest rate steady at 6.25% at its last policy meeting PHCBIR=ECI, pausing its tightening cycle that began last year, with inflation – which slowed for a fourth consecutive month in May at 6.1% – on track to easing back towards the target band.

Dakila said the BSP’s policy-making monetary board, which meets on June 22 to review interest rate settings, remains data-dependent in making its own policy decision.

—Reporting by Enrico Dela Cruz; Editing by Muralikumar Anantharaman and Christian Schmollinger