Philippine Finance Secretary Benjamin Diokno, who’s a member of the central bank’s rate-setting panel, expects the key rate to stay at the current level for the rest of year as inflation remains elevated.
(Bloomberg) — Philippine Finance Secretary Benjamin Diokno, who’s a member of the central bank’s rate-setting panel, expects the key rate to stay at the current level for the rest of year as inflation remains elevated.
The Bangko Sentral ng Pilipinas will probably keep the benchmark rate at 6.25% on June 22 and possibly for the rest of 2023 even as inflation is slowing and authorities forecast price gains to ease to within the 2%-4% target by the fourth quarter, Diokno told Bloomberg Television’s Haslinda Amin on Friday.
“I think it’s just enough that we pause for a while,” Diokno said when asked if he sees a rate cut on the horizon. “If there’s a significant drop in inflation, then we will be encouraged to cut the policy rate. I think it’s time to maybe consider a policy cut, maybe sometime towards first quarter of next year.”
The BSP raised borrowing costs by 425 basis points since May last year to rein in the fastest inflation in 14 years, in a series of actions that Diokno described as one of the region’s most aggressive tightening cycle. Even as the rate hit a 16-year high, the economy likely managed to grow this quarter at a similar pace as the first three months this year, according to the finance chief.
Rate hikes continue in other countries as policymakers are concerned “with how embedded” price pressures have become, said Diokno. In the Philippines, price gains have cooled to an 11-month low in May, providing room for the BSP to pause its monetary tightening last month.
Other highlights from interview:
- President Ferdinand Marcos Jr. to likely sign wealth fund law in July
- Government targets to raise about $2 billion from the sale of dollar-denominated retail bonds
- Finance chief reiterates his preference for next central bank governor: an economist and not a banker, and one who has international stature
–With assistance from Cecilia Yap, Richard Lewis, Manolo Serapio Jr. and Michelle Jamrisko.
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