Finance Secretary Foresees No Further Interest Rate Hikes Amid Easing Inflation

MANILA — Finance Secretary Ralph Recto expressed confidence that the Philippines will not experience further increases in interest rates as the country observes a downward trend in inflation, which aligns with global patterns. This statement was made during the Bureau of Internal Revenue’s National Tax Campaign kick-off on Thursday.

According to Philippines News Agency, who serves as the government’s representative on the Monetary Board of the Bangko Sentral ng Pilipinas (BSP), the decision stems from the latest inflation data and the central bank’s recent monetary policy actions. “I don’t expect a future rate hike because inflation is going down and it seems that it’s going down globally also,” Recto remarked. He highlighted the January inflation rate, which dropped to 2.8 percent, marking the lowest level since October 2020.

The BSP’s Monetary Board has maintained policy rates at their current levels for two consecutive meetings, with another rate-setting meeting scheduled for February 15. After increasing policy rates by a total of 450 basis points since May 2022 to combat high inflation, bringing the benchmark policy rate to 6.5 percent, Recto believes that the current rates are sufficiently high to manage inflationary pressures.

Recto indicated that, assuming inflation continues to decline and remains within target ranges, the next logical step would be to consider reducing interest rates. However, he noted that any decision on policy easing would likely take cues from the actions of the United States Federal Reserve. “There’s a possibility it would go down. It all depends on what the US Fed does, as well. And then we look at our own data too,” he said, emphasizing the interconnectedness of global financial markets and the influence of the Fed’s policies on domestic decisions.