At least 25 bps rate hike likely in next 2 policy meetings, BSP Gov. Medalla says

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) is set to continue hiking key policy rates by at least 25 basis points in its first two meetings, Governor Felipe Medalla said Tuesday.

Speaking with reporters in Pasay City, Medalla responded in the affirmative when asked if a 25-basis point rate hike was in the cards moving forward, saying it is unlikely that there will be no adjustments made, ruling out what he described as “very extreme” moves.

“Of course these are not 0 probability events, but they are not very likely events and the reason is number one, I already said, it seems like the strong dollar period is over,” he said.

“Second, we’re beginning to see oil prices drop and as I said, our forecasts for inflation is actually closer to 3 (percent) than to 4 (percent) for the third quarter of next year and possibly below the 2 (percent) near the end of next year and early 2024,” he added.

The peso earlier this year hit a fresh historic low of P59:$1, which the central bank has attributed to the strength of the US dollar. It has continued to appreciate and closed Monday, December 19, at P55.24:$1.

Meanwhile, local pump prices have also been rolled back in the past several weeks, but were hiked

The BSP last week decided to hike policy rates by 50 basis points, bringing them to the highest level in 14 years — the overnight reverse repurchase rate to 5.5%, the overnight deposit facility to 5.0%, and the overnight lending facility to 6.0%.

It expects inflation to peak this month and average 5.8% for the full-year 2022, before starting to decelerate by January and move back to the 2% to 4% target range by July next year.

Asked on the possibility of a pause on monetary policy adjustments after the next two policy meetings, Medalla said it was very likely, but any movement will still be data dependent.

“Well again, I would say we’re data dependent but clearly, I will not bet my life or even one week’s salary after two meetings next year wala na,” he said.

“One cannot rule out na after two meetings wala na but again, given that the nature of the surprises, one can never say never. Again, it’s a very likely event but there are things that could change it,” he added.—AOL, GMA Integrated News