BSP chief: Rates can stay steady

MONETARY authorities can keep key interest rates steady «for the time being,» Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said on Monday, with a cut likely should inflation fall further.

«Evolving inflation conditions show that the BSP can hold its policy settings steady for the time being,» Remolona told legislators during a budget hearing.

«If price pressures continue to ease, it will be possible for the BSP to consider a less restrictive monetary policy stance.»

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. Photo from BSP

The central bank chief's remarks contrast with earlier statements indicating that a rate cut could be ordered next Thursday with inflation risks having moderated.

Remolona told reporters last week that a 25-basis-point cut could be ordered on August 15, to be followed by another later in the year, despite an expected uptick in July inflation.

Data for the month will be issued today, and the BSP — which is targeting 2.0- to 4.0-percent inflation — has forecast a 4.0- to 4.8-percent result.

Advertisement

Remolona told legislators that the balance of risks to inflation had «shifted to the downside, and this is due largely to the implementation of rice tariff reduction,» but added that «we still face some upside risks for inflation.»

Malacañang last month slashed tariffs on rice imports to 15 percent from an already-lowered 35 percent. Surging prices of the staple have been blamed for an inflation uptick earlier this year.

«The recent government decision in EO62 to reduce the tariff on rice will be so helpful in our efforts to tame inflation,» Remolona said.

«In the BSP's latest forecast, the rice tariff reduction will have a very significant downside impact on the inflation trajectory until 2025,» he added.

Advertisement

Risks to inflation, the BSP said, will come from higher domestic prices of food items other than rice, from transport charges, and from electricity rates.

The central bank's benchmark rate currently stands at 6.5 percent, the highest since 2007, following 450 basis points of rate hikes beginning May 2022 as inflation started surging in the wake of Russia's invasion of Ukraine.

The rate has been kept