Finance chief Diokno calls for pause in interest rate hikes amid slowing inflation

Finance Secretary Benjamin Diokno is calling for a pause in interest rate hikes as the inflation rate is already slowing down.

“I’m asking for a pause, that's my position. Inflation is going down…,” Diokno told reporters at a press chat in Manila.

Since May last year, the policy-setting Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has raised interest rates by a total of 425 basis points to temper rising inflation.

In April this year, however, inflation or the rate of increase in the prices of goods and services recorded its third straight month of slowdown from a peak of 8.7% in January, clocking in at 6.6% from 7.6% in March. 

“There's no reason why we should increase the rate,” Diokno said.

The Finance chief is one of the seven members of the Monetary Board which is chaired by BSP Governor Felipe Medalla.

“I'm one of the seven. I’m expressing my vote, it's up to them,” Diokno said.

The Monetary Board is set to have its policy meeting on May 18, 2023.

EXPLAINER: Higher policy rates: How are you affected?

Monetary policy or interest rates are among the tools used by central banks to stabilize inflation through controlling money supply by raising borrowing costs.

Higher borrowing costs could make consumers and businesses spend less, therefore reducing economic activity or lowering demand and eventually lowering prices.

Finance Undersecretary Zeno Abenoja, for his part, said that the full impact on inflation of the 425-basis point rate hikes of the BSP "will be felt in the coming months," noting that the "soonest is nine months to as long as 18 months." —KG, GMA Integrated News