BLOOMBERGÂ
The Philippine central bank is likely to leave its key interest rate unchanged this week, Governor Felipe Medalla said, as cooling inflation gives monetary authorities reason to pause the most aggressive tightening cycle in two decades.
“If for sure this is a permanent trend, clearly we must pause,†Medalla told reporters on the side-lines of a forum of the central bank and the International Monetary Fund (IMF) in central Cebu province.
“But then as you know we’ve been surprised so many times before,†he added.
Inflation slowed for a third straight month in April from a year ago, reducing pressure on the Bangko Sentral ng Pilipinas (BSP) to keep raising rates. BSP’s policy-making monetary board meets on May 18 to set its benchmark rate which it has increased by 425 basis points since May 2022 in one of the most aggressive tightening moves in the region.
Finance Secretary Benjamin Diokno, who sits on the central bank’s seven-member monetary board, said that he will vote for a rate pause. Policymakers in emerging markets are shifting their focus to the growing risk of a global recession, with Vietnam already cutting its key rate twice this year.
BSP is forecast to hold its benchmark rate at 6.25%, according to the majority of economists surveyed by Bloomberg.
Inflation will start “looking good†in November or December, Medalla said separately. Economic growth this year will be “quite good†while potentially slowing in 2024 due to base effect, he said.
National Economic and Development Authority Secretary Arsenio Balisacan had warned that raising rates further may dampen growth ahead as pent-up demand eases. The Southeast Asian economy marked its slowest growth since exiting the pandemic-induced downturn, expanding by 6.4% in the first quarter.