Philippines central bank sees room for further rate hike

The Philippines central bank is still hawkish with monetary policy and saw further room for an interest rate hike, with a cut unlikely anytime soon, its governor said on Friday (Jan 26).

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 last year.

Rates, however, have been kept steady in its final two meetings in 2023.

Eli Remolona, speaking at a reception event with private bankers, said a rate cut in the first semester would be too soon. The rate-setting monetary board will meet on Feb 15 to review interest rates.

The economy had likely performed better in the final quarter of last year compared with the third quarter, he said, a trend that could allow the BSP more room to raise rates.

“If the growth is strong, that gives us a bit more room to hike,” Remolona told reporters.

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Headline inflation last month returned to target to 3.9 per cent, but average inflation for 2023 stood at 6.0 per cent, way above the central bank’s 2 per cent to 4 per cent target.

Remolona said January inflation was likely to be a low number because of base effects.

The BSP’s latest “risk-adjusted” inflation forecast indicates inflation could settle at 4.2 per cent this year, slightly above its target range. REUTERS