Philippine Central Bank Halts Rate Hike

The Philippine central bank paused its monetary policy tightening on Thursday after ten consecutive rate hikes and signaled that rates will remain at the current levels in the near term.

The Monetary Board of the Bangko Sentral ng Pilipinas kept the interest rate on the overnight reverse repurchase facility at 6.25 percent.

The interest rates on the overnight deposit and lending facilities were retained at 5.75 percent and 6.75 percent, respectively.

In the first quarter, economic growth moderated to 6.4 percent from 7.1 percent in the preceding period. This was the weakest in the current sequence of growth that began in the second quarter of 2021.

The potential moderations in the recent months suggested that previous policy rate increases continue to work their way through the economy, the board observed.

In April, consumer price inflation slowed to 6.6 percent, which was the weakest in eight months.

Although headline inflation continued to decelerate, core inflation has eased only marginally, the board said. Moreover, the balance of risks to the inflation outlook remains largely tilted towards the upside.

“The Monetary Board also deems it necessary to keep the policy interest rate at its current level over the near term, as ongoing price pressures continue to warrant close monitoring,” the bank said.

“A prudent pause also allows monetary authorities to further assess how macroeconomic and financial conditions will evolve in view of tighter global financial conditions,” the bank added.

ING economist Nicholas Mapa expects the central bank to maintain policy rates at 6.25 percent in the coming months while reducing reserve requirements by 200 bps to 10 percent in June.

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