BSP governor sees room for further rate hike

January 31, 2024 - 10:34 AM
(Photo from BusinessWorld)

The Philippines central bank was still hawkish with monetary policy and saw further room for an interest rate hike, with a cut unlikely anytime soon, its governor said on Friday.

The Bangko Sentral ng Pilipinas (BSP) has raised its benchmark rate by a total of 450 basis points since May 2022 to rein in inflation, including an off-cycle hike in October last year.

Rates, however, have been kept steady in its final two meetings in 2023.

Eli Remolona, speaking at a reception event with private bankers, said a rate cut in the first semester would be too soon. The rate-setting monetary board will meet on Feb. 15 to review interest rates.

The economy had likely performed better in the final quarter of last year compared to the third quarter, he said, a trend that could allow the BSP more room to raise rates.

“If the growth is strong, that gives us a bit more room to hike,” Remolona told reporters.

Headline inflation last month returned to target to 3.9%, but average inflation for 2023 stood at 6.0%, way above the central bank’s 2% to 4% target.

Remolona said January inflation was likely to be a low number because of base effects.

The BSP’s latest “risk-adjusted” inflation forecast indicates inflation could settle at 4.2% this year, slightly above its target range

— Reporting by Mikhail Flores, Karen Lema and Neil Jerome Morales; Editing by Martin Petty