MANILA – The Bangko Sentral ng Pilipinas (BSP) signaled on Thursday the possibility of raising interest rates to counter faster inflation rate, but medium-term conditions must warrant the policy shift.
What could prompt the central bank is the inflation rate last month, which would be released by the statistics office on Friday.
“Let us see on May 4. If it’s higher than 4.3 percent, then it means something. If it is lower, then we have to reassess all the numbers,” BSP deputy governor Diwa Guinigundo told reporters on the sidelines of the ADB 51st Annual Governors Meeting in Pasig City.
Inflation clocked in at 4.3 percent in March, the fastest in at least four years, and DBS noted it would continue to accelerate.
Inflation is a key consideration for the central bank’s Monetary Board in policy decisions.
“We have to look at it from a medium-term perspective. What’s next in 2019? We have always been consistent with our perspective,” Guinigundo noted.
“At the same time, we have to look at inflation expectations in light of what the market describes as an increasing trend,” he said.
During a policy meeting on March 22, the BSP decided to keep policy rates unchanged even if inflation was expected to take an “elevated” path the rest of the year.
While the board said it expects inflation to settle at 3.9 percent this year, inflation is expected to ease to 3.0 percent in 2019.
“The outlook for 2019 is consistent with 2 to 4 percent. People say prices have gone up and that this is the time for BSP to reconsider its present monetary policy stance,” Guinigundo noted.
“But again, you have the discipline of inflation targeting. We look at both price and monetary conditions. We look at both trend and output,” he said.
The central bank position is that even if inflation continues to rise this year, the trend might not persist in the medium-term, which would mean adjusting policy rates is not necessary.
“What do we expect to happen in 2019? If indeed inflation is expected to revert to target path, then why move at this point?” Guinigundo noted.
“If all of the sums of these considerations point to the need for the BSP to undertake some decisive action, we will not have second thoughts on this. Maintaining price stability is our mandate and we have to adhere to that mandate,” he said. (GMA News)
