MANILA (Reuters) -The Philippine central bank kept its benchmark interest rate steady at 6.50% for a second straight meeting on Thursday as price pressures have started to ease, but said policy would have to stay “sufficiently tight” to bring inflation back to target.
All but one of the 24 economists in a Dec. 5-11 Reuters poll correctly predicted the central bank’s decision. One expected a quarter-point hike.
“The Monetary Board continues to see the need to keep current policy settings sufficiently tight,” Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona told a press conference, reiterating the central bank’s readiness to adjust policy as needed.
Annual inflation rose at its slowest pace in 20 months in November at 4.1% versus the previous month’s 4.9%, bringing the average rate over the 11-month period to 6.2%, which was still well outside the central bank’s 2%-4% target.
The central bank lowered its risk-adjusted inflation forecast to 6.0% this year from 6.1%, and to 4.2% next year, from 4.4%, but noted that risks to inflation “still leans significantly toward the upside.”
Economists in the same Reuters poll believed the central bank was done hiking rates, with median forecasts showing policy on hold until the end of the second quarter of 2024, with the next move likely to be a cut.
“With inflation headed lower and the Fed dovish, more signs point to BSP being done with rate hikes,” ING Economist Nicholas Mapa said on X platform.
But when asked if the central bank was nearing or at the end of its tightening cycle, senior assistant governor Illuminada Sicat said: “We need some firm indications that inflation expectations are already anchored firmly within the target range.”
The Fed left interest rates unchanged on Wednesday and Chair Jerome Powell said its historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming “into view”.
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