A PAUSING of rate hikes is “in the cards” for the Philippines amid global market developments, a member of the Bangko Sentral ng Pilipinas (BSP) Monetary Board said Saturday.
“That’s in the cards. The way the global market is going and the way oil prices are behaving…it augurs well,” MB Member Victor Bruce J. Tolentino said at the Economic Journalists Association of the Philippines (EJAP)-San Miguel Corporation (SMC) Business Journalism Seminar last Saturday.
Following the US and European central banks raising their interest rates by 25 basis points (bps), Tolentino noted, “Just to keep up, we will probably be forced to at least…25 again.”
The Monetary Board member noted that if the BSP is trying to match the US Federal Reserve, there’s a possibility of raising another 25 bps in BSP’s next meeting slated for May 18.
“Well the actions of the Fed are always a factor that we need to consider because if the differential between US rates and Philippine rates are higher, then it attracts money to go to the US. So we need to watch out for that,” Tolentino stressed.
However, he said trying to match the US Fed is not the only factor that prompts the BSP to increase interest rates, and noted that “there are other factors,” such as the change in food prices.
“If all of a sudden food prices fell much greater by some miracle, then we might not need to. Again, as I said, it depends on the data,” Tolentino noted.
According to a story by BusinessMirror last Friday, BSP Governor Felipe M. Medalla said he has made his position clear regarding the rate hikes. Should the inflation data be positive on a month-on-month basis, the BSP may pause increases in rates in its next meeting on May 18.
Medalla said inflation has been slowing as a result of the arrival of the country’s food imports. The timing of the imports were identified as one of, if not, the biggest causes of the uptick in commodity prices.
“I have already made my view very clear, which is that if we have one more good month-on-month inflation, it’s time to pause because we already have two very good months,” Medalla said.
“In other words, the imports are beginning to work.”
The BSP, in its month-ahead forecast, expects April inflation to be slower due to the decline in electricity prices and select food items.
Data released by the Philippine Statistics Authority (PSA) last Thursday showed the country’s headline inflation slowed to 6.6 percent in April, the slowest in eight months and the third consecutive decline for the year.
National Statistician Claire Dennis S. Mapa said, “If you’re talking of the month-on-month value, [this is] from 8 to 7.9 percent, 0.1 percentage point but that gap is small to say that it is really statistically significant. But we are seeing that it is already at least going down, slowing down.”