Philippines finance secretary not expecting future rate hike

Philippine Finance Secretary Ralph Recto said on Thursday (Feb 8) 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 Feb 15. Many economists believe it is done hiking rates in the current tightening cycle.

The country’s annual inflation stood at 2.8 per cent in January, its slowest pace in more than three years, against 3.9 per cent in December, and marked the second consecutive month that the pace of price increases was within the central bank’s 2 to 4 per cent 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 to 7.5 per cent to “something more realistic”, but he did not provide a figure.

The Philippine economy grew 5.6 per cent in 2023, missing the government’s 6 to 7 per cent growth goal for that year.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

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, 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 US 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. Reuters