MANILA (Bloomberg): The Philippine central bank may increase its key rate by 25 basis points or leave it unchanged at its policy meeting on Thursday (March 16), Finance Secretary Benjamin Diokno (pic) said.
A shift in the Federal Reserve’s stance to smaller interest rate hikes allows other central banks to slow their pace of monetary tightening, Diokno, a member of the Bangko Sentral ng Pilipinas’ monetary board, said at a forum on Monday.
"I think now we are more likely to have a 25 basis point adjustment or even a likelihood of a halt or steady,” Diokno said, adding that he’s just one vote in the seven-member Monetary Board.
While many central banks including the Federal Reserve have slowed rate increases to quarter-point increments, BSP has so far stuck to outsized moves to tame elevated inflation. In contrast, some central banks in South-East Asia have either paused or cut interest rates.
A slower headline inflation print in February to 8.6% from a 14-year high 8.7% in the prior month could give the BSP space to ease on its tightening campaign that has been its most aggressive in two decades. The central bank last raised its benchmark rate by 50 basis points to 6% in February, having increased it by 400 basis points since May.
Diokno, who was central bank governor before becoming finance chief last year, said he expects inflation to ease to 4% - the upper end of the BSP’s target range - as early as the third quarter.
He also said a reduction in banks’ reserve requirement ratio, currently at 12%, could happen within the year. BSP Governor Felipe Medalla has said a cut in the reserve ratio will happen if inflation is clearly moving toward the central bank’s 2%-4% target.