Further rate hikes in Philippines could hurt consumers: economics minister
THE Philippines economics minister cautioned on Friday (Oct 6) that raising interest rates further 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 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,” he told reporters at a briefing.
Annual inflation picked up for a second straight month in September due to rising food and transport costs. The central bank said on Thursday that it “stands ready to resume monetary-policy tightening as necessary” to stem price pressures.
The central bank has held rates steady in its last four meetings, but economists think a hike at its Nov 16 meeting looks certain.
The 6.1 per cent inflation rate in September was the highest in four months, jumping from August’s 5.3 per cent. It brought average inflation to 6.6 per cent, well beyond the central bank’s 2 per cent to 4 per cent 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.”
He said he was also wary of the possibility that higher interest rates could make the local currency stronger and, thus, the country’s exports more expensive. “A relatively weak peso can make the economy grow faster,” Balisacan noted.
Despite the downside risks to growth, Balisacan said the government is not giving up on its 6 per cent to 7 per cent target for the year. REUTERS
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