Further rate hikes in Philippines could hurt consumers — NEDA chief

October 6, 2023 - 3:49 PM
A woman arranges vegetable in a market stall in Edsa Kamias in Quezon City, metro Manila, May 23, 2018. REUTERS/Dondi Tawatao

The Philippines economics minister cautioned on Friday against further raising interest rates, which could hurt consumers already suffering from high inflation.

Economic Planning Secretary Arsenio Balisacan said the economy may be able to withstand further monetary tightening by the country’s central bank, but questioned whether it was still necessary to do so.

“If I were in the monetary board, I would say no (to rate hikes). We are the most aggressive in the region in raising interest rates,” Balisacan told a press briefing.

Annual inflation picked up for a second straight month in September due to rising food and transport costs and the central bank said on Thursday it “stands ready to resume monetary policy tightening as necessary” to stem price pressures.

The central bank has held rates steady for its last four meetings but economists think a hike at its Nov. 16 meeting looks certain.

The 6.1% inflation rate last month was the highest in four months, jumping fromAugust’s 5.3%. It brought average inflation to 6.6%, well beyond the central bank’s 2%-4% target for the year.

But Balisacan, who is not a member of the central bank’s policy-making monetary board, said raising interest rates “can hurt” the economy and consumers.

“The source of the inflation is supply side. It is not the demand side that requires a monetary solution,” Balisacan said.

He said he was also wary of the impact of higher interest rates on the peso for that could make the local currency stronger and make the country’s exports more expensive, Balisacan said.

“A relatively weak peso can make the economy grow faster,” Balisacan said.

Despite downside risks to growth, Balisacan said the government is not giving up on its 6.0%-7.0% target for the year.

– Reporting by Mikhail Flores; Editing by Martin Petty and Kim Coghill