Bangko Sentral likely to keep rates unchanged: Medalla

Lady Vicencio, ABS-CBN News

Posted at Jun 08 2023 07:56 PM

MANILA - Interest rates will likely remain unchanged when the central bank's Monetary Board meets on June 22, Bangko Sentral ng Pilipinas Governor Felipe Medalla said on Thursday. 

Medalla told reporters on Thursday afternoon that while inflation has been declining for the past four months, it is still best to prepare for potential economic headwinds.

“My own view is the pause is very likely to continue because the recent data actually is consistent with it. But of course, I cannot speak for the Monetary Board,” Medalla said.

The BSP has forecast the inflation rate to ease to below 4 percent by September or October. Despite this, Medalla said a cut in interest rates is still not on the horizon.

“Kung talagang siguradong-sigurado na tayong na-attain na ‘yong target very very firmly, we’ll cut. Pero kung tingin nating alanganin pa, then hindi pa rin pwede. In other words, it will depend on the data and it will depend on which risks we are afraid of,” Medalla said.

The BSP governor also stated that a cut in interest rates this early could also result in the weakening of the peso against the dollar.

Last year, the peso fell rapidly versus the dollar as the BSP played catch up with the US Federal Reserve which had been aggressively raising interest rates to dampen quickening inflation in the world's largest economy.

The Monetary Board, where Medalla sits as chairman, will convene for the next policy meeting on June 22.

This could be Medalla’s last policy setting meeting before his term as BSP governor expires on July 3.

With still no signals of a possible reappointment, Medalla said he has always set his mind to serve for one year.

“From, the very beginning I always behave as though I’ll serve for only 1 year. It will be a blessing to be able to serve more than that. I’ve been working for 40 years. The chance to have served for one year is a gift and I’d be too greedy to be asking for more,” Medalla said.

The latest comments on inflation and interest rates come on the heels of a cut in reserve ratio requirements. The RRR for big banks is now single-digits. Medalla and his predecessor Ben Diokno promised to make it so by July this year.

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