26-6-2023 (MANILA) Philippine Finance Secretary Benjamin Diokno, who also serves as a policymaker in the central bank, expressed his expectation for a “long pause” in interest rate hikes as inflation is projected to ease.
The central bank recently kept its key policy rate unchanged at 6.25 percent for the second consecutive meeting on Thursday.
Diokno stated on Friday to reporters, “I think we will continue to maintain. It will be a long pause. I don’t see any cut until we really have that strong evidence of a decline” in inflation.
As one of the seven members of the Monetary Board, responsible for policy decisions, Diokno will participate in the next meeting on August 17, which will be under the guidance of a new central bank governor.
President Ferdinand Marcos Jr. announced on Friday the appointment of board member Eli Remolona as the new governor of the Bangko Sentral ng Pilipinas, replacing Felipe Medalla, who oversaw significant tightening measures by the central bank in recent years.
The central bank has raised interest rates by 425 basis points since May of the previous year to combat inflation. In May, inflation eased to 6.1 percent after four consecutive months, yet it remains above the bank’s target range of 2-4 percent.
According to a Reuters poll, a majority of analysts anticipate that the central bank will maintain interest rates for the remainder of the year, although a few predict a rate cut by the end of the year.
“Our expectation is that inflation could drop below 2 percent in the first quarter of next year due to the high base effect. That would be the appropriate time to consider rate cuts,” Diokno commented.
