Diokno sees no need to match US rate hike

Louise Maureen Simeon - The Philippine Star
Diokno sees no need to match US rate hike
The Bangko Sentral ng Pilipinas, led by newly appointed Governor Eli Remolona (3rd from left), celebrated its 30th anniversary on July 28 by holding its annual reception for the banking community at the BSP headquarters on Roxas Boulevard in Manila. Joining Remolona are past BSP governors led by (from left) Benjamin Diokno, Amando Te-tangco Jr. and Jose Cuisia Jr. Former BSP governor Felipe Medalla did not attend the event.
Jesse Bustos

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) does not have to match the latest rate hike of the US Federal Reserve as inflation is expected to continue its downward trajectory.

In a briefing, Finance Secretary Benjamin Diokno said inflation in July likely slowed further from the 5.4 percent rate in June. As such, inflation is on track to be within the target range of two to four percent by the fourth quarter.

The US central bank, in its policy meeting last week, lifted rates by 25 basis points and remains open for another hike in September.

But for Diokno, there is no need to mirror the Fed, at least for the time being.

Diokno was the BSP governor during the Duterte administration and currently sits in the seven-member Monetary Board.

“I don’t think we have to match. That’s my view,” Diokno said.

“We have to monitor other indicators like inflation and the impact of the recent adjustment on the global economy and also in the domestic,” he said.

The BSP will meet and decide on monetary policy on Aug. 17. Market consensus is for the BSP to keep policy rates unchanged.

The central bank has been on pause for two straight meetings amid indications of its previous monetary tightening exerting its impact on the economy.

“When we meet on Aug. 17, we will look at all the numbers because we are data dependent, as well as how the market has reacted,” Diokno said.

While the average headline rate of 7.2 percent is still way above the target band, the BSP is confident this will return to the range by the fourth quarter of the year.

Based on BSP’s projection, inflation would ease but will still be above target at 5.4 percent this year, barring any unforeseen shocks especially coming from the supply side.

This would cool down significantly to 2.9 percent in 2024 largely due to base effects.

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