FILIPINO consumers waiting for interest rates to decline are in for a disappointment as the Bangko Sentral ng Pilipinas (BSP) intends to raise interest rates anew in its next meeting and maintain this rate until the end of the first semester of next year.
This was according to BSP Governor Eli M. Remolona Jr., who announced on Thursday that the Monetary Board decided to maintain its key policy rates for the fourth consecutive month this year.
BSP’s Target Reverse Repurchase (RRP) Rate was maintained at 6.25 percent. Accordingly, the interest rates on the overnight deposit and lending facilities were retained at 5.75 percent and 6.75 percent, respectively.
“I would say, rate cuts this year, 2023, are off the table. But rate hikes are not off the table,” Remolona said in a briefing on Thursday.
“I expect rates to be at the level at the end of this year. If we raise later in the year, we have a meeting in November, so if we raise in November, I expect rates to stay at that level for the early part of next year,” he also said.
When asked whether the BSP is considering to hike rates in November, Remolona said “Well, honestly, yes.”
The Monetary Board decided to maintain key policy rates for now, but raised its inflation outlook for this year and next year. Only the inflation expectation for 2025 was kept at 3.4 percent.
Average inflation is now seen to reach 5.8 percent in 2023 from 5.6 percent previously, while the forecast for 2024 likewise rose to 3.5 percent from 3.3 percent.
BSP said the upward adjustments in the 2023 and 2024 projections reflect the spillovers from weather disturbances, rising global crude oil prices, and the recent depreciation of the peso.
“A rate hike is on the table in November. How big it will be will depend on the data. How bad the data is with respect to inflation,” Remolona said.
“For now, we see a kind of balance between demand and supply. We’re close to the right level for interest rates. Whether there will be a cut next year will depend on really bad news especially when it comes to output. But I don’t foresee any news that’s not bad for next year. The world economy is slowing down, but it is a small downside risk,” he explained.
In August, the Philippine Statistics Authority (PSA) said successive typhoons have caused commodity prices to surge in August with vegetables like tomatoes and the country’s staple, rice, leading the charge to increase inflation to 5.3 percent.
The poorest Filipinos experienced an even higher rate of inflation at 5.6 percent as food inflation for the bottom 30-percent income households at the national level moved at a faster pace of 7.7 percent in August 2023 from 6.1 percent in July 2023 and 7.1 percent in August 2022.
However, the BSP as well as the National Economic and Development Authority (Neda) remain confident that the country’s inflation rate will slow to 2 to 4 percent by the last quarter of 2023.