Diokno wants pause in rate hikes


Finance Secretary Benjamin Diokno said he wanted the Bangko Sentral ng Pilipinas (BSP) to pause interest rate hikes amid easing inflation.

“I’m for a pause, that’s my opinion. Inflation is going down and while the current account deficit expanded, it is manageable and that’s because of the growth of the economy,” Diokno said in a briefing. “So overall, job market is fine, revenues are up, so there’s no reason why we should increase rates.”

The BSP has raised key policy rates by a total of 425 basis points due to high inflation.

Its overnight reverse repurchase facility is currently at 6.25 percent.

Headline inflation, which reached as high as 8.7 percent in January, has decelerated to 6.6 percent in April.

Diokno said the full impact of the rate hikes could be felt in the second or third quarter of the year.

“There’s a lagged effect, at the soonest nine months, as long as 18 months. But we don’t know what will happen next if they will maintain the rate at 6.25 percent. It’s not fully felt yet. We just started adjusting the rate (in) May last year,” he said.

Finance Undersecretary Zeno Ronald Abenoja, meanwhile, noted that while rate hikes may affect economic activity, “this is manageable.”

“Primarily because, for example, as monetary policy has adjusted upward, the adjustment of fiscal policy is very gradual. There continues to be support on the domestic economy, including infrastructure spending. Last year, it’s 5.8 percent of GDP (gross domestic product). Prior to that, it was also 5.8 percent,” he said.

Abenoja explained that the government’s 6 percent to 7 percent growth target for this year already took into account the effect of the BSP’s monetary policy tightening.

“The target of at least 6 (percent) up to 7 percent takes into account the impact of all these previous monetary policy adjustments,” he said.


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