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BSP not ruling out 25 bps rate hike in November meeting — Remolona


The Bangko Sentral ng Pilipinas’ (BSP) policy-setting Monetary Board is likely to raise interest rates by 25 basis points in its next meeting in November.

“We are considering hikes but we’re going where the data leads us,” BSP Governor Eli Remolona told reporters at a press briefing on Wednesday.

In its September meeting, monetary authorities kept rates unchanged at 6.25% for the target reverse repurchase (RRP), the overnight deposit facility rate at 5.75%, and the overnight lending facility rate at 6.75%.

The same rates have been in place since March 2023.

Remolona, however, hinted at a possible rate hike in November as inflation expectations for the year have been hiked to 5.8% from the previous forecast of 5.3%, and to 3.5% from 3.3% for 2024.

During the press chat, the BSP governor divulged that “I wouldn't rule out 25 basis points [rate hike], for example.”

Remolona was also asked for his comment on National Economic and Development Authority (NEDA) Secretary Arsenio Balisacan’s earlier remark that further raising interest rates could hurt the economy

In response, the central bank chief said, “I think what Arsi really meant was we shouldn't go for very aggressive hikes.”

Monetary policy or interest rates are among the tools used by central banks to stabilize inflation by controlling the money supply by raising borrowing costs.

For example, the BSP sets the overnight reverse repurchase rate or the key policy rate, in which the central bank borrows from banks to maintain price stability.

This, in turn, impacts the country’s money supply as it shifts money from banks into the central bank.

Since May last year, the Monetary Board had raised interest rates by a total of 425 basis points to temper rising inflation.

The likelihood of the BSP snapping its monetary tightening pause is amid the two straight months of inflation rate acceleration seen in August and September.

Inflation, which measures the rate of increase in prices of consumer goods and services, grew faster at 6.1% in September from 5.3% in August, as food and transport costs weighed on prices amid domestic and external supply challenges.

“I wouldn’t say that we’re done with the tightening,” Remolona said.

“I would say, it’s a serious concern whether supply side shocks would have a lasting impact. Normally, they don't have a lasting impact, but once they get into expectations, once they get into wages, it becomes an issue for us. Of course, we only control the demand side. And for now we think tightening has relieved pressure from the demand side. So far we think it hasn't really affected our growth prospects. We're watching that very, very carefully,” the BSP said. — RSJ, GMA Integrated News