Philippine finance secretary sees ‘long pause’ in rate hikes

Philippine Finance Secretary Benjamin Diokno.  REUTERS/Lisa Marie David/File hpoto

MANILA  – Philippine Finance Secretary Benjamin Diokno said he expected the central bank, of which he is a policymaker, to take a “long pause” in raising interest rates as inflation is expected to ebb.

The bank held its key policy rate steady at 6.25 percent for a second straight meeting on Thursday.

READ: BSP keeps key rate unchanged at 6.25%

“I think we will continue to maintain,” Diokno told reporters on Friday. “It will be a long pause. I don’t see any cut until we really have that strong evidence of a decline” in inflation, Diokno said.

He is one of the seven members of the policy-making Monetary Board, which next meets on Aug. 17 to review policy under the leadership of a new central bank governor.

President Ferdinand Marcos Jr on Friday named board member Eli Remolona as governor of Bangko Sentral ng Pilipinas, replacing Felipe Medalla, who oversaw the central bank’s most aggressive tightening in years.

READ: Marcos appoints Eli Remolona as new governor of Bank Sentral ng Pilipinas

Since May last year, the central bank raised rates 425 basis points to combat inflation. It has slowed for four months to 6.1 percent in May but remains above the bank’s 2 percent-4 percent target.

A strong majority in a Reuters poll forecast the bank would stay on hold for the rest of the year, though a few saw a rate cut as soon as year-end.

“Our expectation is inflation could hit below 2 percent by the first quarter of next year because of the high base effect. That would be the time to consider cuts,” Diokno said.