The Central Bank of Philippines (BSP) monetary board will meet in Manilla today to determine the next course of action
The Central Bank of Philippines (BSP) monetary board will meet in Manilla today to determine the next course of action for interest rate changes.
Despite historic growth in Philippine GDP during 2022, benchmark interest rate hikes increased by 225 basis points since May last year following an inflation surge and previous strict tightening policies. The BSP recorded an inflation peak of 8.7% last December—higher than the expected 7.5% to 8.3%. Regional inflation cooled to 6.6% in April, providing much needed breathing room for the economic sector to flexibly control economic concerns. Given the Philippines depends on the US Federal Reserve interest rates to match rising inflation from international markets, future rate hikes may fall in line with the American rates changes to avoid a weaker Dollar-Peso exchange.
It is very likely the BSP will pause interest rates at 6.25% as GDP demonstrates robust growth, alongside the cost reduction of fuel imports, agricultural products, and energy security. Assuming the USA Federal Reserves are unlikely to cut rates, anticipate the BSP to follow suit until a tangible and expected inflation rate of between 2 to 4% is expected to be achieved by Q4 2023. Economic expansion will likely be dampened if interest rates increase.