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Philippines: BSP rules out another huge rate hike

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has ruled out another huge 75-basis-point rate hike as it is looking at further raising key policy rates by 25 to 50 basis points next month.

During the Post-SONA Economic Briefing 2022, BSP Governor Felipe Medalla said the Monetary Board is unlikely to hold another surprise off-cycle meeting.

“One thing I can say is you can surprise people only once. So there will be no more off-cycle,” Medalla said.

After back-to-back rate increases of 25 basis points on May 19 and June 23, the BSP delivered an aggressive 75-basis-point increase during a surprise off-cycle meeting on July 14 to anchor inflation expectations, temper mounting risks to the inflation outlook, and help manage spillovers from other countries that could potentially disanchor inflation expectations.

This brought the cumulative hikes to 125 basis points, raising the reverse repurchase rate to 3.25 percent from an all-time low of two percent.

“Our next meeting is in August. If you are to bet on four numbers – zero, 25 (basis points), 50 and 75 – just like in diving, you can rule out the slowest and the highest,” Medalla said.

According to the BSP chief, the remaining rate increase would be data-dependent.

“So there are forces, changes that say that there will be more rate hikes, but not too much. But there are forces too,” Medalla said. “As long as the US Federal Reserve keeps jacking up rates, it is very hard for a small open economy not to respond at least partially.”

He said the price of oil is now below $100 per barrel, which could lead to lower fuel prices.

Source: https://www.philstar.com/business/2022/07/27/2198150/bsp-rules-out-another-huge-rate-hike