Remolona signals potential rate hike in November after raising inflation forecasts for 2023 and 2024

After raising the inflation forecast for 2023 and 2024, Bangko Sentral ng Pilipinas Governor Eli Remolona said monetary authorities are ready to hike rates as the risks to the inflation outlook remain skewed to the upside.

“As I’ve said, a rate hike is on the table for November. How big it would be will depend on the data,” Remolona said in a briefing after the Monetary Board’s meeting Thursday.

The BSP raised its inflation forecast for 2023 to 5.8% from the previous 5.6% and increased its inflation forecast for 2024 to 3.5% from 3.3%.

However, the MB kept the BSP’s target reverse repurchase rate at 6.25% and maintained the overnight deposit and lending rates at 5.75% and 6.75%, respectively, despite the hike in the inflation forecast.

“We are ready to raise rates if the supply shocks are significant enough,” Remolona stressed.

While core inflation moderated, implying that underlying pressures eased, transport fare hikes and increases in electricity rates remain a threat. There is also a small downside risk associated with the slowdown of the world economy, especially when the focus is on inflation.

“Rate cuts for 2023 are off the table, but rate hikes are still possible,” Remolona said.

The BSP renewed its call for non-monetary interventions, including a temporary reduction in import tariffs, which should go hand in hand with the calibration of the volume and timing of imports’ arrival.”