Philippines central bank chief judges out one more off-cycle rate action

July 27, 2022: -On Tuesday, the Philippine central bank chief ruled out another off-cycle move on monetary policy tightening, which marked a rate hike of below 75 basis points at its August 18 meeting in an ongoing bid to restrain red-hot inflation.

“A thing I can say is you can shock people once, so there will be no more off-cycle,” Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said.

“My guess is you can rule out zero or 75 basis points,” he added while speaking at a forum on President Ferdinand Marcos Jr’s policy agenda and replying to a question on the magnitude of the BSP’s following policy action.

His remarks came ahead of Wednesday’s U.S. Federal Reserve policy decision, with the market pricing in a nearly 90% chance it will hike by 75 bps.

The BSP’s reverse repurchase facility rate is currently at 3.25% following three successive hikes counting 125 bps between May and July, a surprising 75 bps on July 14 that was approved outside the regular schedule for policy reviews.

Medalla stated future policy moves would remain data-driven and reiterated that the economy was able to absorb rate increases.

Philippine inflation, which averaged 4.4% in the first half of the year and topped the full-year 2%-4% target band, is expected to remain elevated, driven by high fuel and food prices.

On Monday, Marcos outlined his economic strategy focusing on financial management, infrastructure upgrades, and agricultural productivity. He pledged to ensure reasonable prices and an adequate domestic supply of essential farm products, which include rice, amid a looming global food crisis.

Finance Secretary Benjamin Diokno, who spoke at a similar forum, said the government did not need to borrow almost it during earlier crises, like at the height of the pandemic.