BSP says ‘early’ interest rate hike ideal

BSP Governor Amando M. Tetangco Jr. INQUIRER FILE PHOTO

MANILA, Philippines — The Philippine central bank has hinted at a hike in benchmark interest rates following the US Federal Reserve’s decision to further reduce its monetary stimulus for the world’s largest economy.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. on Thursday left little room for doubt that an adjustment in current policy settings would be forthcoming, possibly as early as next week.

“On the part of the BSP, we see early measured adjustments in monetary policy as ideal. Gradual rather than discrete movements  would be less disruptive and would help businesses plan better,” Tetangco said in a statement Thursday morning.

“Even as domestic inflation over the policy horizon remains within target, measured adjustments may be warranted given external developments including the heightened geopolitical risks that could result in volatility in international commodity prices,” he said.

The BSP’s Monetary Board meets next Thursday to decide on possible interest rate adjustments.

The BSP’s key overnight borrowing and lending rates have been at their current record lows of 3.5 and 5.5 percent since late 2012.

Tetangco said even though consumer price movements would likely remain within target for the rest of the year, officials should be mindful of external forces that might upset current forecasts.

He noted, however, that the recovery of the US economy would help lift global growth, benefiting countries like the Philippines.

“To the extent the Fed guidance points to steadying US growth, this is positive for rebalancing in global economic growth rates, in general, and the Philippines, in particular,” Tetangco said.

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