OECD says rate hike next week ‘appropriate’ step for BSP to take

Raising policy rates further would be the "appropriate" step for the Bangko Sentral ng Pilipinas (BSP) to take in its policy meeting next week, the Organization for Economic Co-operation and Development (OECD) said Tuesday.

According to OECD Asia Desk head Kensuke Tanaka, a further hike in local interest rates is warranted given the current inflationary environment of the country.

"Under this situation, I think it's a reasonable decision in my view," he told reporters in Quezon City.

This comes as inflation clocked in at 5.2 percent in June, the fastest in at least five years, primarily driven by higher prices of food and non-alcoholic beverages.

The BSP's Monetary Board has already decided to tighten policy rates this year—25 basis points each in May and June—as inflation expectations remained elevated for the year.

"Among other Southeast Asian countries, I would say inflation pressure in the Philippines is higher," said Tanaka.

"Inflation pressure in the Philippines now is very high... At the moment, an interest rate hike I think is the appropriate measure," he explained.

The Monetary Board, in the minutes of its latest policy meeting, hinted of raising key interest rates anew during its meeting on Thursday next week, August 9, just hours after the Philippine Statistics Authority (PSA) is scheduled to release the second-quarter economic growth figures.

The International Monetary Fund (IMF) earlier welcomed the possibility of more interest rate hikes from the BSP in efforts to safeguard price stability and continue progress.

"At the moment, I think the central bank manages it relatively well for the situation," said Tanaka. — BM, GMA News