Philippine policy rate has reached the peak, finance chief says

THE Philippine central bank’s key interest rate is likely to be kept at the current level at the next policy meeting this month amid slowing inflation, Finance Secretary Benjamin Diokno said.

“We have reached the peak,” Diokno, who is part of the Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board, told reporters on Monday (Nov 6), referring to the policy rate. “Given the decline in inflation, there’s no justification for higher interest rates.”

The central bank raised its benchmark rate to a fresh 16-year high of 6.5 per cent in an out-of-cycle move on Oct 26 and signalled that it’s ready to deliver “follow-through policy action” if necessary to bring inflation back to its 2 per cent to 4 per cent target.

BSP governor Eli Remolona said the day after that the central bank may either stand pat or increase its key rate by 25 basis points at its policy meeting on Nov 16 depending on upcoming data. Last week, central bank estimates showed headline inflation for October – due out on Tuesday – likely slowed to within a range of 5.1 per cent to 5.9 per cent compared with 6.1 per cent in September.

Diokno said he also expects inflation to have slowed last month and that third-quarter economic growth is likely faster than the 4.3 per cent pace in April-June. Increased spending on infrastructure during the past quarter should have also supported faster growth, he said, after Monday’s listing of the Philippines’ US$1.26 billion retail dollar bond sold last month.

The finance chief reiterated that the lower end of the government’s 6 per cent to 7 per cent growth goal remains attainable with lower inflation expected to boost consumption along with the local village and youth council elections held on Oct 30. The government will release third-quarter gross domestic product data on Thursday. BLOOMBERG