The Philippines: Diokno: Rate hike too early as recovery hangs

  • The head of the country’s central bank said an accommodative monetary stance remains in place as it is too early to raise interest rates.
  • Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in an interview with Bloomberg Television it is too early to hike rates as monetary authorities are focused on assessing developments here and abroad.
  • “Right now we don’t see any need to increase interest rates at this point,” he said.
  • On concerns of a slower-than-expected recovery and to allow the economy to digest previous aggressive easing measures, the central bank’s Monetary Board has kept interest rates on hold in the last two rate setting meetings in Dec 20 and Feb 21.
  • “We think the current policy setting is appropriate for this kind of outlook. So we intend to maybe keep an accommodative monetary policy with the existing policy rates at historic low of 2% to provide support to the economy,” Diokno said.
  • The BSP chief sees consumption growing by 5% in 2021 after slumping in 2020.
  • Likewise, Diokno said the country’s unemployment rate would continue to improve after hitting an all-time high of 17.7% in Apr 20 as the economy continues to reopen.
  • In terms of inflation, Diokno said prices are seen easing in 2H21 after remaining elevated in 1H21 due to supply-side factors such as the rise in global oil prices, as well as the increase in the prices of key commodities such as meat and vegetables due to the African Swine Fever (ASF) outbreak and weather-related disturbances.
  • Based on its latest assessment, the central bank’s Monetary Board now expects inflation to average 4% instead of 3.2% in 2021 and 2.7% instead of 2.9% in 2022.

External Link :