Philippines BSP likely to pause rate hikes, governor says
THE Philippine central bank is likely to leave its key rate unchanged at its policy meeting this week, governor Felipe Medalla said, possibly hitting the pause button after its most aggressive tightening cycle in two decades.
Medalla said a pause is the “most likely result” at the May 18 meeting, he said on the sidelines of a forum of the central bank and the International Monetary Fund (IMF) in central Cebu province on Monday (May 15).
He was responding to a comment by Philippine Finance Secretary Benjamin Diokno, who sits on the central bank’s seven-member monetary policy board, that he will vote for a pause in the benchmark interest rate in this week’s decision.
“That’s not a bad guess, but I cannot speak for the board,” Medalla said, referring to Diokno’s comment.
An easing in Philippine annual inflation for a third straight month in April has lessened pressure on the Bangko Sentral ng Pilipinas (BSP) to continue raising interest rates. BSP has increased its benchmark rate by 225 basis points since May 2022 in one of the most aggressive tightening moves in the region.
The South-east Asian economy also marked its slowest growth since exiting the pandemic-induced downturn, expanding by 6.4 per cent in the second quarter. National Economic and Development Authority Secretary Arsenio Balisacan had warned that raising interest rates further may dampen economic growth ahead as he foresees pent-up demand easing.
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BSP is forecast to hold its benchmark rate at 6.25 per cent on Thursday, according to almost all economists surveyed by Bloomberg. Policymakers in emerging markets are shifting their focus to the growing risk of a global recession, with Vietnam already cutting its key rate twice this year.
But HSBC said it may be “premature” for BSP to leave its key rate steady for now since the core consumer price index remains strong and domestic demand is still robust. In a note, HSBC said it expects another 25-basis point hike at this week’s meeting before BSP pauses its tightening cycle.
IMF Mission head Jay Peiris said on Friday the Philippines’ monetary stance may need to stay tighter for longer as core inflation remains elevated. BLOOMBERG
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