NO MORE OFF-CYCLE RATE. Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said Tuesday (July 26, 2022) that there would be no more off-cycle rate adjustments in the central bank's key rates for now after noting the drop in oil prices in the international market. He, however, said there is a need to still hike the BSP policy rate given the same expectations for the Federal Reserve’s funds rate. (Photo from BSP)
MANILA – Any further changes in the Bangko Sentral ng Pilipinas’ (BSP) key policy rates will not be made off-cycle again, BSP Governor Felipe Medalla said.
During the post-State of the Nation Address (SONA) economic briefing of the Cabinet at the Philippine International Convention Center (PICC) on Tuesday, Medalla maintained that future policy rate decisions would continue to be data-dependent, reiterating the central bank’s mandate of price stability.
He said monetary authorities need to balance the developments in oil prices in the international market, which is among the major factors for the increasing inflation rate, and the expectations on the path of the Federal Reserve’s funds rate.
Medalla said the decline in oil prices to less than USD100 per barrel “signals that there is less need for rate hikes.”
He, however, cited expectations for additional jumps in the Fed’s key rates, which would result in issues on interest rate differential between the US and the Philippines.
To date, the BSP’s overnight reverse repurchase (RRP) rate is at 3.25 percent while the Fed’s benchmark rate is between 1.5 percent and 1.75 percent.
Both central banks have raised their respective key rates by a total of 150 basis points so far this year.
The BSP’s key rates have been raised by 25 basis points in May, 50 basis points in June, and 75 basis points on July 14.
The Fed’s policy rates were hiked by 25 basis points in March, 50 basis points in May, and 75 basis points in June.
Both rate adjustments were made to help address the accelerating inflation rate.
Philippine monetary authorities said the domestic economy could take the impact of the rate increases because of its continued recovery.
The BSP’s policy-making Monetary Board will have its fifth rate-setting meeting on August 18.
Medalla said the possible rate increase would be between 25 basis points and 50 basis points.
“For the rest of the year, it all depends on what happens outside of the Philippines,” he said.
Monetary authorities, he said, do not want inflation to go up and eventually result in second-round effects, such as upward adjustments on wage and minimum fare. (PNA)
