MANILA, Philippines — The Bangko Sentral ng Pilipinas is in no mood to rush any decision to lift interest rates even after the US Federal Reserve started hiking rates on Wednesday by a quarter-point to combat rising inflation stateside.
For BSP Governor Benjamin Diokno, the central bank does not need to move in concert with the US Fed, stressing that the central bank’s decisions will be “data-driven”. The last time interest rates were tweaked by the powerful Monetary Board was back in November 2020 when the BSP capped an aggressive easing episode meat to stimulate credit growth in the pandemic-hit Philippine economy.
"We don’t necessarily have to move in pace with Fed adjustments, we will review at our upcoming policy meeting next week. The BSP calibrates its monetary policy in response to external developments only to the extent that they influence the outlook on growth and inflation," Diokno said in an online briefing on Thursday.
The US central bank clearly signaled that the hike, already well telegraphed by Fed officials in the weeks leading up to it, would be the first in a series.
At home, the Philippine Stock Exchange index 1.37% to close at 7,122.45 as investors already priced in the Fed’s move.
It took several months before the BSP’s rate cuts were felt by the local economy, with bank lending only returning to growth mode in August last year. The economy has also exited recession while inflation has been benign since last December, which Diokno said gave the central bank more room to keep monetary policy loose.
But rising oil prices in the international market is prompting Filipinos to tighten their belts. At the same time, a weakening peso as a result of stronger imports and dollar outflows amid the Russia-Ukriane war is adding upward pressure to domestic inflation, convincing analysts that the BSP may start hiking rates very soon.
But for now, the overnight reverse repurchase facility stood at a historic low of 2% while the rates on the overnight deposit and lending facilities have been maintained at 1.5% and 2.5% each.
"Moreover the BSP has various tools such as the flexible exchange rate system, our strong external buffers, macro-prudential framework and liquidity enhancing and management tools to deal with the short-term volatility that may arise from risk factors related to potential tightening of financial conditions," Diokno said.