Medalla hints at another rate hike

By Eileen Mencias

The Bangko Sentral ng Pilipinas may impose another hefty hike in its benchmark interest rate next month.

With inflation showing no signs of abating, policymakers plan to raise interest rates by either 25 or 50 basis points at their upcoming meeting in August.

Speaking at the post SONA briefing of the cabinet at the PICC, BSP governor Felipe Medalla said the drop in the prices of oil in the world market could signal that there wouldn’t be a need for rate hikes but the US Federal Reserve Board is certain to raise its policy rates by 75 basis points.

These are among the factors the MB weighs during its policy meetings.

Medalla explained that the US is deemed to be a “safer currency” than the Philippine peso.
With the “very little difference” between the US and the Philippine policy rates, a depreciation of the local currency could ensue that would buoy inflation.

“If you are to bet on four numbers—zero, 25, 50, and 75—you can rule out the lowest and the highest,” Medalla said.

He said it would all depend on what happens in other countries because the forces driving inflation now are external.

He said they want to cut the momentum that the high inflation creates which demands for wage and other price adjustments.

“The imported inflation will have a life of its own and have a self-fulfilling prophecy that prices are rising because prices are rising,” he said.

“There is so much uncertainty but we stand ready to make the necessary adjustments so that balancing between maintaining and sustaining growth and ensuring financial stability on one hand and price stability on the other will all be achieved,” Medalla said.

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