THE rate hikes implemented by the Bangko Sentral ng Pilipinas (BSP) have managed to anchor the inflation level of the country, but the decision of the Monetary Board (MB) on whether or not to raise rates further at its next meeting has yet to be made based on an assessment of other economic indicators, Finance Secretary Carlos G. Dominguez III said on Wednesday.
“Well, that’s what it seems. So I just have to say that, using a nautical term, the President as the captain of the ship has seen the headwinds that we are facing and has tacked [it] very well,” Dominguez said.
When asked if the MB will put on hold further rate hikes, especially during its policy meeting on December 13 as inflation is expected to trend downward, the finance chief pointed out that MB members would still have to assess other economic indicators. “We’ll see what the numbers tell us,” he added.
At the MB’s policy meeting in November, the BSP decided to continue its tightening cycle by approving a 25-basis-point hike, increasing the overnight reverse repurchase (RRP) interest rate to 4.75 percent from 4.5 percent.
The increase was also adopted in line with interest rates on the overnight lending and deposit facilities of the Central Bank. The move to raise rates was explained to help tame inflationary pressures.
Inflation for August hit a nine-year high of 6.4 percent, followed by a 6.7-percent inflation rate for September, and remaining steady at 6.7 percent for October.
The Philippine Statistics Authority (PSA) on Wednesday reported that the country’s inflation rate dropped to 6 percent for November. The BSP earlier predicted a slowdown for the November inflation due to recent oil- price rollbacks, a stable supply of rice, as well as a stronger peso.
In line with the continued implementation of the fuel excise tax increase in 2019 affecting inflation, Dominguez said he expects the impact of the fuel and other taxes to still be within expectations, as the main contributors seen right now for inflation are fish and rice.
“There are many factors that are playing into the inflation number, and what we have identified even now, is that one quarter of the inflation comes from fish and rice, so we have to focus on that. The inflation contribution of fuel and, of course, the taxes I think are within what we expected and are going to be within what we expected,” Dominguez said.
The President on Tuesday approved his economic team’s recommendation to push through with the next tranche of fuel excise taxes taking effect in 2019, seeing the sharp turnaround in world oil prices.
Under the Tax Reform for Acceleration and Inclusion law, the scheduled increase in fuel excise tax for 2019 is P2 per liter. It called for an excise tax of P2.50 per liter on diesel, with an additional P2 to be imposed next year and P1.50 per liter in 2020. This brings the excise tax on diesel to P4.50 per liter in 2019, and P6 per liter in 2020.