Local interest rates may rise some more in the coming weeks, albeit by a modest amount, to help ensure that the sustained uptrend in consumer prices experienced since the start of the year is finally blunted, according to the head of Bangko Sentral ng Pilipinas.
Making his first comments after returning last Friday from a five-week medical leave, BSP Governor Nestor Espenilla Jr. maintained his hawkish monetary policy stance amid emerging indications that the country’s nine-year-high inflation rate may have finally peaked this month.
“This is the judgment area at the next policy meeting: Whether there’s need to do at least one more modest hike to seal the deal and firmly anchor inflation expectations,” he said, repeating his comments first made to Bloomberg News, when asked about the possibility of another interest rate hike.
Espenilla’s comments jibe with those made by BSP Deputy Governor Diwa Guinigundo, who said two weeks ago that the central bank was prepared to raise interest rates further if needed to help contain inflation, which hit 6.7 percent last September, it’s highest in nine years, due to high international crude oil prices and a mismanaged local rice supply, accentuated by the effects of a government tax hike earlier this year.
Other government economic managers and private sector analysts believe, however, that inflation may have already peaked this month and will soon be on a downtrend toward normalization by early 2019.
In response to this year’s price spikes, the central bank raised interest rates by a total of 150 basis points over four consecutive Monetary Board meetings since May, marking the most aggressive tightening streak since the economic crisis in 2000, during the presidency of Joseph Estrada.
The BSP’s key overnight borrowing rate, which dictate borrowing and investment rates across the entire local financial system, now stands at 4.5 percent, its highest since 2011.