According to a member of the Monetary Board (MB), a pause in rate increases is now “in the cards” for the Philippines in light of recent developments in the international financial scene.
“That is planned,” said Monetary Board Member Victor Bruce J. Tolentino during the recently-concluded Economic Journalists Association of the Philippines (EJAP) – San Miguel Corporation Business Journalism Seminar. “It augurs favorably the way the world market is going and the way oil prices are acting.”
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The Monetary Board executive also said that if the Bangko Sentral ng Pilipinas (BSP) is attempting to match the US Federal Reserve, it may raise rates by an additional 25 basis points.
“Just to keep up, we will probably be forced to go for at least 25 again,” Tolentino shared, noting how the US and European central banks have already increased their interest rates by 25 basis points (bps).
“Well, the Fed’s activities are always something we need to take into account because, if the difference between the US and Philippine interest rates is greater, it encourages capital to go to the US. Therefore, we must be vigilant,” he emphasized.
He added that in addition to trying to match the US Fed, there are other factors, such as the rise in food costs, which could cause the BSP to raise interest rates. “We might not need to if food prices dropped dramatically overnight due to a miracle. As I’ve stated before, everything depends on the evidence.”
Imports now starting to produce results
In a related development, BSP chief Felipe M. Medalla stated that if monthly inflation numbers remain positive, the central bank could decide to hold off on raising interest rates at its upcoming meeting on May 18.
“I have already made my position very clear,” said Medalla, “that if we will have one more good month-over-month inflation, it’s time to pause because we already have two very good months.”
According to him, the arrival of the nation’s food imports has caused an increase in the rate of inflation to slow down. One of the reasons for the increase in commodity prices, if not the main one, was determined to be the timing of the imports.
The BSP has anticipated decreased inflation in April as a result of falling electricity and some food costs in its month-ahead estimate.
Latest data from the Philippine Statistics Authority (PSA) reveals that the country’s headline inflation rate decreased to 6.6 percent in April, the lowest level in eight months, and the third consecutive decline for the year.
National statistician Claire Dennis S. Mapa confirms the report, saying, “We can already observe that it is slowing down or at least decreasing. But if you are talking about the month-over-month figure, [this is] from 8 to 7.9 percent or 0.1 percentage point, that difference is too little to state that it is actually statistically significant.”