MANILA, Philippines — There will be no more surprise rate increases coming this year, Bangko Sentral ng Pilipinas Governor Felipe Medalla said Tuesday, adding that there’s less pressure now on the central bank to fire off jumbo rate hikes to rein in uncomfortably high inflation.
“One thing I can say is you can only surprise people once.” Medalla said at an economic briefing the day after President Ferdinand Marcos Jr. delivered his first State of the Nation address.
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“So there will be no more off-cycle (hikes),” he added.
The BSP on July 14 took everyone by surprise when it hiked its key rate — which banks use when borrowers are charged interest for taking out a loan — by 75 basis points at an emergency policy meeting.
It was the BSP’s most forceful tightening since it became an inflation-targeting central bank in 2002, in what may be a desperate bid to arrest a crashing peso that’s adding fuel to boiling inflation.
The powerful Monetary Board, the BSP’s policy making body, will meet again on August 18. At the economic briefing on Tuesday, Medalla struck a dovish tone, saying that while another rate hike could come next month as rates rise fast in the US, there is less pressure now on the BSP to be aggressive in its tightening because global oil prices are starting to drop.
“On one hand, the current drop in price of oil signals there’s a less need for rate hike. On the other hand, the US Federal Reserve is surely going to raise its policy rate by 75 basis points,” Medalla said.
“So these are the things we are balancing… So I’m guessing… if you are betting on four numbers — zero, 25, 50, 75 — just like in diving you can rule out the lowest and the highest. That’s all I can say so far,” he added.
But for Nicholas Mapa, senior economist at ING Bank in Manila, Medalla must stay tight in his communication to signal the BSP's willingness to adjust monetary policy to safeguard the inflation trajectory.
“This should include remaining data driven, taking his cues from the Fed decision later this week and July’s inflation figure out early next month,” Mapa said in a Viber message.
Separately, Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp., believes Medalla is managing to sustain his hawkish messaging.
“I think he is still hawkish on his tone, but he is just telegraphing to expect another 50bps hike next month. This is well above the original expectations of just 25bps per meeting,” Enriquez said in an interview. — Ian Nicolas Cigaral with Ramon Royandoyan