Philippine economy can handle one more rate hike, central bank governor says

[MANILA] Philippine central bank governor Eli Remolona said the economy can handle another quarter-point increase in the benchmark interest rate, suggesting policymakers are ready to hike again next month.

“It can, if by 25 basis points,” Remolona told reporters on Monday (Jul 6) when asked whether the economy can handle one more rate increase. He said he expects economic growth to rebound in the second half of the year, hoping gross domestic product will rise more than 3 per cent during the period.

“The problem this year was there was a lack of government spending which we expect to recover strongly in the second half of the year,” Remolona said.

The nation’s economy slowed dramatically in the second half of last year after the government announced a probe into the misuse of public works spending. The increased scrutiny led to a slowdown in approvals of state projects, and consumer and business confidence also took a hit.

The Bangko Sentral ng Pilipinas (BSP) has raised its benchmark interest rate by 50 basis points this year in a bid to slow inflation that’s risen to well above its 3 per cent goal, becoming one of the hottest in South-east Asia.

Remolona said last month that another rate hike is possible at the BSP’s next policy meeting on Aug 27, but signalled that monetary authorities are not leaning towards a steep rate increase going forward with inflation expectations intact.

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The central bank chief’s comments come a day before the release of inflation data for June with the headline number forecast to ease to 6.5 per cent from 6.8 per cent in May, according to the median estimate in a Bloomberg survey of economists.

The government has cut its GDP growth target this year to 3.5 to 4.5 per cent from an earlier assumption of as much as 6 per cent expansion amid headwinds including the Middle East conflict and a possibly intense El Nino weather event.

Earlier in the day, Economic Planning Secretary Arsenio Balisacan said he expects the economy to expand faster in the second half of 2026, adding that the second quarter remained a challenging period due to the Middle East conflict. BLOOMBERG