PHILIPPINE CENTRAL BANK Governor Benjamin E. Diokno said raising the key policy rate to between 2.5% and 2.75% as part of an exit from pandemic-era accommodation would be “reasonable and consistent” with the nation’s economic growth and inflation targets.
“We plan to start the normalization process in the second half of the year,” Mr. Diokno said in a mobile-phone message on Wednesday, when asked about the plan for rate hikes. “It is not date specific, but we will continue to be data dependent,” he said, adding that a 2.75% key policy rate “might be reached by next year.”
Bangko Sentral ng Pilipinas last week held interest rates steady at a record low 2%. While the authority sees inflation averaging above its 2%-4% target this year, it expects consumer-price increases to be within the goal next year. Economic planners forecast output to grow between 7% and 9% this year.
The Philippines is among many Asian nations that has so far refrained from the global rate-hiking cycle led by the US Federal Reserve, choosing to nurture economic recovery even as price pressures rise.
“This is as clear a signal as it gets that again BSP is in no rush to start hiking despite forecasting inflation already above target this year,” said Euben Paracuelles, economist at Nomura Holdings, Inc. in Singapore. It “suggests BSP will be quite gradual in the pace of normalization, in contrast to the US Fed.”
The peso rose as much as 0.3% to its strongest against the dollar since March 7 in early trading on Wednesday.
Mr. Diokno on March 26 said a rate increase isn’t the appropriate tool to address supply-driven price pressures, and suggested non-monetary moves to the government. BSP has kept interest rates on hold since November 2020, and is scheduled to set the benchmark rate next on May 19. — Bloomberg