Economy

BSP open to matching more Fed hikes to tame inflation

Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla attends an economic briefing in Pasay City, July 26, 2022. — REUTERS/LISA MARIE DAVID

The Philippines central bank may keep on matching the Federal Reserve’s next rate increases should domestic inflation continue to quicken, according to Governor Felipe M. Medalla.

“If the inflation rate remains high, then we have to match” the Fed, Mr. Medalla said in an interview with Bloomberg Television’s David Ingles and Yvonne Man Friday. “If it’s clear already that the inflation rate is decelerating, we may not have to match.”

Mr.Medalla’s comments came after the Philippines reported the fastest inflation in almost 14 years last month and a day after the governor announced that the monetary authority will match this week’s 75-basis-point hike at the Nov. 17 meeting.

With price pressures remaining elevated and the peso trading near a record low, the 72-year-old governor is signaling that he will continue with the central bank’s most aggressive tightening in two decades.

Mr. Medalla said he prefers not to draw a line in the sand for the peso and that’s where he differs from his predecessor Finance Secretary Benjamin E. Diokno. Having more flexibility in managing the currency allows for a more efficient use of the central bank’s dollar reserves, said the governor.

This is also why he announced on Thursday a rate hike two weeks before the scheduled meeting.

“We don’t want to be selling too much dollars,” said Mr. Medalla, when asked why he signaled the rate move early. “The best way to do that is to make the markets know in advance what we will do,” he said, adding that the country has sufficient FX reserves.

Inflation will peak this year and price gains will slow to within the central bank’s 2%-4% goal by the second half of 2023, he said.

The peso, which has weakened about 13% this year against the dollar, rose 0.1% on Friday. — Bloomberg

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