H1 rate hike unlikely, says Philippine central bank governor

11 Jan 2022

The Bangko Sentral ng Pilipinas will unlikely hike rates in H1 this year, as it awaits a fall in unemployment and a stronger economic recovery, says governor, Benjamin Diokno. 

“After the performance in the first two quarters of the year, that’s when we seriously look at whether we will make some adjustments,” according to Diokno.

“We want to make sure that the economy is recovering well.”

The governor added that before hiking rates, the central bank usually likes to see steady economic growth over four to six quarters and the unemployment figure standing at around 5%. There have been two straight quarters of year-on-year growth in regard to GDP. This includes the 7.1% growth in Q3, and the unemployment rate hitting a pandemic-low 6.5% in November, Bloomberg reports.

In addition, the key interest rate in the Philippines has remained at an all-time low of 2% for over a year, weathering increasing inflation last year. Sufficient foreign exchange reserves and manageable government debt provided a degree of support in the face of tighter global financial conditions, Diokno went on to say.

The central bank governor added that the Philippine economy can grow between the forecast 7-9% range in 2022, with inflation set to decelerate close to the central bank’s target of 2-4%.

Moreover, foreign exchange strategists predict further pressure for the peso as the central bank plans to keep an accommodative monetary policy, whilst the Federal Reserve maintains a hawkish stance. Up to now in 2022, the peso has lost around 0.5% against the Dollar.

The Bangko Sentral ng Pilipinas governor stated he’s “very comfortable” with the peso trading within a range of 48-53 per dollar, saying the currency will unlikely weaken past the 53-mark.