Medalla hints at continued rate hike pause

FILE PHOTO: Bangko Sentral ng Pilipinas Governor Felipe Medalla poses for a photograph in his office at Manila, Philippines, November 18, 2022. REUTERS/Eloisa Lopez

MANILA  -Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla hinted at a continued pause on policy rate hikes this week, saying that the downtrend on inflation across the Philippines could justify this.

Medalla told reporters that at the rate things were going, keeping the BSP’s benchmark rate unchanged for the second policy meeting in a row on June 22 appeared to be the best strategy.

The rate of increase in prices of goods and services that households commonly purchase had decreased continually from 8.7 percent in January to 6.1 percent in May.

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The BSP chief reiterated that the monthly readout should be less than 4 percent before the end of this year, and that inflation should be more or less 3 percent by next year.

“Now of course we know from experience that something can happen that makes the actual inflation lower or higher,” Medalla said.

Private-sector analysts—including those at ING Bank, Goldman Sachs, Rizal Commercial Banking Corp., Security Bank Corp. and Pantheon Macroeconomics—are also expecting the BSP’s Monetary Board to keep the policy rate unchanged this week.

State economic managers have also reiterated that while inflation had eased for the fourth straight month in May, El Niño remained a major concern that the government is addressing.

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In the Philippines, the climate phenomenon increases the chance of lower than normal rainfall conditions, which could lead to dry spells and droughts in some areas of the country.

El Niño is expected to develop in the next couple of months, with a higher chance of persisting up to the first quarter of 2024. INQ