BSP chief more hawkish amid stubborn inflation | Inquirer Business
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BSP chief more hawkish amid stubborn inflation

The expected increase in the policy rate of the Bangko Sentral ng Pilipinas (BSP), on which the Monetary Board (MB) is scheduled to decide today, will be an easy decision to make and is expected to be followed by more, considering the continued need to bring down inflation, according to BSP Governor Felipe Medalla.

The hike in the BSP’s overnight borrowing rate, which currently stands at 3.25 percent, “is going to be more than a coin toss,” Medalla said.

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The BSP chief, who is also MB chair, was speaking at a panel hosted by the Economic Journalists’ Association of the Philippines in partnership with San Miguel Corp.

Last July 26, Medalla said the MB policy meeting in August, the sixth of eight this year, would result in either an increase of 0.25 percentage point (ppt) or 0.5 ppt.

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“Tomorrow is probably more than a coin toss,” he said. “I won’t say which side.”

However, following the release of inflation data earlier this month—which showed that prices of basic goods and services increased for the fifth month in a row to 6.4 percent in July—Medalla said the latest figures “raise the possibility” for 0.5 ppt rather than for 0.25 ppt.

He also gave hints that the BSP was ready to go for additional increases later this year, as inflation has gone further removed from the government’s target band of 2 percent to 4 percent.

The July results brought the seven-month average, January to July, to 4.7 percent.

“Clearly we are going to miss the inflation target this year,” Medalla said. “Whether there will be more [rate hikes] in remaining meetings this year, we will not rule them out.”

Economic think tanks also expect the BSP to continue raising its overnight borrowing rate later this year by as much as 0.75 ppt across three meetings.

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TAGS: Bangko Sentral ng Pilipinas, Inflation, Interest rates‎
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