Bangko Sentral Eyes Rate Hike

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. has hinted at a modest interest rate increase by the Monetary Board, a potential 25-basis point rate hike in their upcoming meeting next month.

Remolona mentioned that the BSP is closely monitoring inflation data. I Photo: Department of Finance Philippines Facebook

"We are considering rate hikes, yes, but we're making decisions based on the data," Remolona said, emphasizing that the BSP's stance aligns with NEDA Secretary General Arsi Balisacan, who has voiced concerns about the impact of a rate hike on consumers and businesses.

Remolona stated, "I don't believe Arsi's views and our views are significantly different," suggesting that Balisacan's position may be against an overly aggressive hike. "I wouldn't rule out, for example, a 25 basis point increase," he added.

The Monetary Board has maintained interest rates at 6.25 percent for four consecutive meetings. Remolona mentioned that the BSP is closely monitoring inflation data. Headline inflation rose to 6.1 percent in September from 5.3 percent in August.

"We are scrutinizing the numbers closely. Some of the upside risks we were concerned about have materialized. For instance, we were concerned about transportation fare hikes, and that has occurred. I can't say that we are finished with tightening," he stated.

Remolona also indicated that they are assessing whether the supply-side shocks will have a lasting impact.

"Normally, they don't have a lasting impact, but when they affect expectations and wages, it becomes a concern. At the moment, we can only control the demand side. For now, we believe that tightening has eased pressure from the demand side. We don't believe it has significantly affected our growth prospects, but we are monitoring the situation closely," he added.

Despite the increase in headline inflation last month, core inflation, which excludes volatile oil and food items, decreased from 6.1 percent to 5.9 percent.

Remolona expressed that the decline in core inflation is "encouraging," emphasizing that the core figure is what reflects the monetary policy perspective.

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