Philippine central bank governor Felipe Medalla said on Friday that he would not rule out another rate hike in August, after announcing a 3-yard rate hike in a flash on Thursday (14th).
The Philippine central bank did not wait for the August meeting to raise interest rates sharply to suppress inflation. When asked whether the central bank was still considering further rate hikes at the August meeting, Medalla said, “may or may not”, he stressed, This will depend on the data to decide.
Medalla noted that there is still room for rates to rise based on inflation, although the need for a 50 basis point hike in August is now much smaller.
Medalla said the central bank makes decisions based on what has happened and what is expected to happen, and they currently believe the Fed will raise rates by 75 basis points this month.
It is just 75 basis points from pre-pandemic 2019 levels after the central bank unexpectedly raised borrowing costs to 3.25%. So far this year, the Philippine central bank has raised interest rates by a total of 125 basis points, in a bid to catch up with the world in raising interest rates and curbing the devaluation of the local currency.
The Philippine peso has fallen 9.45% against the dollar this year, making it the worst-performing currency in Southeast Asia. The devaluation of the peso has raised concerns among authorities that it could lead to higher food and fuel prices, dampening consumer demand.
ING economist Nicholas Mapa released a report that the Philippine central bank will raise interest rates at least one more time in the third quarter, and if inflation remains high, it may tighten further.
Annual inflation in the Philippines averaged 4.4% in the first six months of this year, exceeding the central bank’s 2%-4% target range.