NextGen Day

MANILA, Philippines — Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) said monetary policymakers will likely consider raising the central bank’s main rates in June, or once the first-quarter domestic output report for 2022 is released.

Diokno said the BSP’s policy-making Monetary Board (MB) will review data on domestic growth, which “may be around 6-7 percent,” in an interview with Bloomberg television on Tuesday night.

On May 19, the Board will hold its third rate-setting meeting.

“And so, based on that, perhaps we’ll make another cycle, which is to say, we’ll have another meeting, and perhaps it’ll be the moment when we consider raising (important policy rates),” he said.

On June 23, the MB will hold its fourth rate-setting meeting.

It has maintained the BSP’s key rates after reducing them by 200 basis points in 2020 to help the domestic economy cope with the pandemic’s effects.

However, economists have predicted a raise in the first quarter of this year, owing to the expected acceleration of inflation as a result of rising oil and commodity prices on the international market.

The Federal Reserve, for example, raised interest rates by 25 basis points in March, the first time since December 2018, as the US consumer price index (CPI) hit a four-decade high in January.

When asked if he is concerned that the BSP will be behind the curve due to decisions made by its peers abroad, Diokno pointed out that the real interest rate in the Philippines and the United States is vastly different.

According to him, the US CPI is now at 8.5 percent, the same as last March, while average inflation in the Philippines was 3.4 percent in the first quarter.

“In light of that, I believe we can afford to wait and see what the Fed does in the next two sessions,” he added.

Following the first significant rate hike in March, the Fed is likely to raise rates five to six times this year, with the May rate hike expected to be around 50 basis points, according to Fed Chair Jerome Powell’s words.

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