The Philippine central bank has room to shift to smaller interest rate increases as inflation cools in the coming months, according to Finance Secretary Benjamin Diokno.
(Bloomberg) — The Philippine central bank has room to shift to smaller interest rate increases as inflation cools in the coming months, according to Finance Secretary Benjamin Diokno.
Diokno, who sits on the central bank’s board, said the monetary authority’s terminal rate won’t likely be far from where it is now, which is 5.5%.
The Philippines, one of the region’s economic bright spots, probably grew at least 7.5% in the fourth quarter, the finance secretary said in an interview with Bloomberg Television’s Yvonne Man.
The nation’s domestic demand is holding up even as the central bank has in the past year raised the key policy interest rate by 3.5 percentage points to cool inflation at a 14-year high.
Pressure to deliver large key rate increases, however, eased as the peso gained strength against the dollar on the Federal Reserve’s downshift. Central bank Governor Felipe Medalla on Tuesday flagged that policymakers may raise the key rate by 25 or 50 basis point at their next rate meeting.
“I think that’s positive news for us,” Diokno said, referring to the Fed’s downshift. He hinted at possible pivot in Philippine rate path toward the middle of the year as inflation cools.
He said he’s confident that with both fiscal and monetary policies working together, domestic inflation will hit right in the middle of the 2-4% target in 2024.
Joining a global deal rush, the Philippines this week sold $3 billion in dollar-denominated debt to fund the budget and finance and refinance sustainable projects. The national plans to issue dollar-denominated retail bonds, Diokno said on Wednesday.
–With assistance from Adrian Wong, Andreo Calonzo, Cecilia Yap and Manolo Serapio Jr..
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