MANILA - The Bangko Sentral ng Pilipinas is likely to start raising interest rates next year, anchored mainly to the inflation dynamics, former BSP Deputy Governor Diwa Guinigundo said Thursday.
Adjustments to the country's benchmark interest rate can be 25 to 50 basis points at a time, Guinigundo told ANC.
"I don’t think it will happen this year, but probably next year. The BSP has always been gradualist and I think it has been correct to be doing so. And I think it should continue to be gradualist," he said.
The BSP has kept the benchmark policy rate at 2 percent for 7 consecutive monetary policy meetings. It has committed to remain accommodative as long as necessary to support the economy during the pandemic.
Inflation, which highly influences monetary policy decisions, has been averaging above the 2 to 4 percent government target range for the past months.
The consumer price index rose 4.9 percent in August. It can potentially reach 5 percent in September, the BSP said.
"It is also dependent on the path of inflation, phase of inflation. If the phase gets to be more rapid than expected, then you can expect a more sizable adjustment to the policy rate by the BSP," said Guinigundo.
He said the lower and revised economic forecast of 4 to 5 percent for the year is realistically achievable compared to the earlier forecast of 6 to 7 percent.
There have been "early signs" of recovery, including the 11.8 percent economic growth in the second quarter, he noted.
The Philippines' gross domestic product contracted by 9.6 percent in 2020, its worst since the end of World War 2.