Further tightening likely next month

MONETARY authorities could raise key interest rates again in November following Thursday's off-cycle hike, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said.

«It is always possible depending on the data,» he told reporters at the sidelines of a central bank event on Friday.

Any increase, Remolona added, could be limited to 25 basis points given the likely economic impact.

A half-percent or 50 bps increase would be in response to «really bad news about inflation» but the BSP chief said «I don't expect that.… I'm not even sure 25 [bps] would be justified.»

«There is a good chance we won't hike. There's a good chance for pause and there is a chance that we might hike. But 50 [bps] is a bit a stretch.»

The BSP's policymaking Monetary Board on Thursday raised key interest rates by 25 bps, citing the need to contain inflation expectations ahead of a scheduled November 16 meeting. It also said that average inflation was no longer likely to return to the 2.0- to 4.0-percent target next year.

The central bank's benchmark rate now stands at 6.5 percent, the highest since 2007.

Remolona, who on Thursday said that monthly inflation was also unlikely to hit the target before the end of the year, told reporters it could resume falling this month «but not as much as we used to expect.»

Consumer price growth accelerated to 6.1 percent in September, rising for a second month in a row from August's 5.3 percent due to higher food and transport costs.

Results for October will be released on November 7, followed by preliminary third quarter economic growth data on November 9.

With inflation expected to stay higher for longer and given the BSP's hawkish stance, Fitch unit BMI Country Risk & Industry Research said another 25-bps increase was likely to follow on November 16.

"...Remolona has indicated that the policy rate could rise to 6.75 percent before harming the economy, providing us with confidence in our view for another hike at its subsequent meeting," it said in a report.

BMI revised its year-end inflation forecast to 4.7 percent from 4.0 percent and also raised that for 2024 to 4.0 percent from 3.7 percent.

It warned, however, that further tightening was likely to do