BSP governor says another rate hike possible

Jekki Pascual, ABS-CBN News

Posted at Feb 25 2023 03:19 AM | Updated as of Feb 27 2023 09:30 AM

Banko Sentral ng Pilipinas (BSP) Governor Felipe Medalla during the Management Association of the Philippines Economic Briefing and Membership Meeting at the Bonifacio Hall of Shangri-La at The Fort, Taguig City on August 19, 2022. Jonathan Cellona, ABS-CBN News/File
Banko Sentral ng Pilipinas (BSP) Governor Felipe Medalla during the Management Association of the Philippines Economic Briefing and Membership Meeting at the Bonifacio Hall of Shangri-La at The Fort, Taguig City on August 19, 2022. Jonathan Cellona, ABS-CBN News/File

MANILA - Bangko Sentral ng Pilipinas Governor Felipe Medalla on Friday said the next monetary rate adjustment will partly depend on the outcome of the inflation rate this February.

At the sidelines of BSP's reception for the banking community, Medalla told reporters if the Consumer Price Index for February is lower month-on-month, then there is a chance the policy rate will remain as is.

However, there is also a possibility of a 25 or 50 basis point hike in the next meeting on March 23, Medalla said. But a 75 bps hike is unlikely, he added.

Medalla is cautious in giving a figure, saying a lot can still change. 

He recalled saying the December inflation rate is already the peak, but the January inflation even went higher at 8.7%, highest since 2008.

But he asserted that target inflation by the end of the year is below 4%.

"Main scenario is we will be below 4% by November or December," Medalla said.

Finance Secretary Benjamin Diokno, who attended the BSP event, expects inflation to be lower in February, but admitted that prices of some goods remain a challenge.

"The price of oil has stabilized, peso also has stabilized, sa food na lang talaga. Nariyan na ang imported sugar," said Diokno.

BSP INDEPENDENCE

Medalla, meanwhile, asserted the independence of the central bank in a speech before top banking officials.

At the 2023 Annual Reception for the Banking Community, Medalla said BSP was born 30 years ago because of the New Central Bank of 1993 and pursuant to the provisions of the 1987 Philippine Constitution. 

This, he noted, made the BSP an independent organization from the national government and has remained so all these decades. 

"The law that explicitly made the central bank independent happened 30 years ago and we see the results in the performance of the economy," he said. 

The governor added that if the three pillars of BSP -- namely price stability, financial stability, efficient payments and settlements system-- are at stake, then he said, "the monetary board members will work very hard to protect the independence of the institution." 

Medalla added that only one cabinet secretary is allowed to join the Monetary Board and all those who sat on the board gave excellent inputs, including Diokno, who is the government's representative to the Monetary Board. 

Medalla did not mention any other issue in his speech in relation to BSP's independence. But the BSP's independence has been brought up in recent months in connection with the Maharlika Investment Fund, where it is proposed that BSP will also contribute to the fund.