DESPITE the economy’s recent lackluster performance in the second quarter and the hawkish pause of the Monetary Board (MB) on Thursday, the Bangko Sentral ng Pilipinas (BSP) believes there is still room to hike interest rates. In a television interview on Friday, BSP Governor Eli M. Remolona Jr. said there…
DESPITE the economy’s recent lackluster performance in the second quarter and the hawkish pause of the Monetary Board on Thursday, the Bangko Sentral ng Pilipinas believes there is still room to hike interest rates.
“I think we have room to hike without contracting the economy. Something we call the neutral or the natural rate of interest is closer to 4 percent in real terms and if our projections are right, we will be at 3.25 percent in real terms for the neutral interest rates. So we have room to hike,” Remolona said.
This also means that the decision of the United States Federal Reserve is of lesser concern to the BSP relative to market expectations. He said the Thai Baht and the Malaysian Ringgit have already weakened against the greenback along with the Philippine peso in the past few days. Remolona said, nonetheless, that the BSP is already “within striking distance” of the inflation target this year and will certainly hit it in 2024 and 2025.
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