Philippine central bank Governor Eli Remolona doubled down on his hawkish rhetoric as inflation remains a worry and the peso traded near a nine-month low.
(Bloomberg) — Philippine central bank Governor Eli Remolona doubled down on his hawkish rhetoric as inflation remains a worry and the peso traded near a nine-month low.
“We’re still not comfortably within the target range,” he told reporters late on Tuesday, referring to inflation. If the central bank has somehow addressed the upside risks to price gains, “then we can begin to think of easing. That’s not on our radar screen at the moment,” he said.
“We’re in a hawkish stance, which means either we pause or we raise for the time being,” he added.
While Remolona extended the pause for a third straight meeting in his first rate decision as governor last week, he kept the door ajar for further monetary tightening as higher fuel and rice prices along with a weaker currency threaten to reignite inflation.
The Bangko Sentral ng Pilipinas had delivered 425 basis points of rate increases in its most aggressive monetary tightening in two decades that brought borrowing costs to a 16-year high.
A further reduction in banks’ reserve requirement ratio, which is not a monetary policy action, is possible later this year, the governor said.
That could provide some cushion to an economy that suffered its weakest growth since 2011 last quarter, excluding the pandemic years. The BSP expects domestic expansion this year will manage to hit 6%, Remolona said, or the lower end of the government’s full-year target.
“Quick reversals are not advisable” when it comes to the policy rate because there’s a risk of confusing the market, the governor reiterated.
The central bank’s hawkish stance is “helping strengthen” the peso, he said. The local currency jumped 1% against the dollar on Friday after Remolona said the BSP has “room to hike without contracting the economy.” The peso closed 0.4% lower on Tuesday.
–With assistance from Ben Sharples.
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