MANILA — Philippine Finance Secretary Ralph Recto said on Thursday he does not expect interest rates to rise as inflation is easing, adding that rates could go down in the second half of the year.
“I don’t expect a future rate hike because inflation is going down … I think our policy rates today are high enough,” Recto said.
The Philippine central bank will hold its first rate-setting meeting this year on February 15. Many economists believe it is done hiking rates in the current tightening cycle.
Annual inflation stood at 2.8% in January, its slowest pace in more than three years, against 3.9% in December, and marked the second consecutive month that the pace of price increases was within the central bank’s 2.0% to 4.0% target range.
While easing price pressures should bode well for the consumption-driven economy, Recto also said there was a need to adjust this year’s growth target of 6.5%-7.5% to “something more realistic,” but he did not provide a figure.
The Philippine economy grew 5.6% in 2023, missing the government’s 6.0% to 7.0% growth goal for that year.
The Bangko Sentral ng Pilipinas (BSP) has raised its benchmark rate PHCBIR=ECI by a total of 450 basis points since May 2022 to rein in inflation, including an off-cycle hike in October, but rates have been kept steady at its final two meetings in 2023.
Recto is the government’s representative to the BSP’s monetary board.
On the timing of possible rate cuts, Recto said the BSP may take its cue from the U.S. Federal Reserve which is expected to begin reducing rates this year.
“The key is what happens in the Fed. Are they going to start reducing rates? If they do, then possibly, we can start reducing rates,” Recto said.
— Reporting by Neil Jerome Morales; Editing by Martin Petty and Jacqueline Wong