The Philippines: BSP not keen on rate hike

• Raising interest too soon due to increasing inflation pressures is seen to do more harm than good, according to BSP Governor Benjamin Diokno.
• Diokno said the uptick in inflation in 2021 to 4.5%, higher than the BSP’s 2-4% target, is seen as transitory as it is expected to ease to 3.3% in 2022 and 3.2% in 2023.
• Inflation averaged 4.5% from Jan 21 to Sep 21 after slightly easing to 4.8% in Sep 21 from a 32-month high of 4.9% in Aug 21.
• “To me, the harm of tightening monetary policy too soon exceeds the harm of moving too late, given that the Philippine economy is at its nascent state of economic recovery,” he said.
• The BSP Monetary Board has kept interest rates at record lows for seven straight rate-setting meetings since Nov 20 to allow economic recovery to gain more traction.
• Diokno said major upside risks in the remaining months include the potential impact of weather disturbances on the prices of key food items, the rise in world commodity prices due to strong demand versus supply chain bottlenecks, and the possibility of a prolonged African swine fever (ASF) outbreak.
• On the other hand, he said the main sources of downside risks are the prolonged impact of derailed domestic economic growth due to delays in the easing of lockdown measures, and the weaker-than-expected global recovery owing to the rapid spread of the more infectious Delta variant.

External Link : https://www.philstar.com/business/2021/10/18/2135001/no-rate-adjustments-rest-2021-diokno

External Link : https://www.philstar.com/business/2021/10/18/2134809/bsp-not-keen-rate-hike