Metro Manila (CNN Philippines, June 22) — The Bangko Sentral ng Pilipinas (BSP) has decided to maintain interest rates, holding off hikes for the second time this year.
The policy rate would stay at 6.25%, monetary authorities said in a briefing Thursday.Interest rates on overnight deposit and lending facilities were also kept at 5.75% and 6.75%, respectively.Last month, BSP Governor Felipe Medalla said it would be “very hard” for the Monetary Board to immediately cut interest rates despite improvement in inflation data as it may result in a weaker peso.During the presser, Medalla stressed that the “most serious error” is to slash rates when the situation does not call for it.This is my personal view, I would like to see at least two months of below 4% (inflation rate) before considering cutting,” he said when asked about ending the tightening cycle.Since last year, central banks around the world have been raising interest rates to tame price pressures.When borrowing cost is high, consumers and enterprises would have to pay more for car or housing loan amortization, and capital.This would cause people to spend less and demand to go down.Philippine Statistics Authority data showed the pace of price increase in May was slower at 6.1% from 6.6% in April.Given the latest figures, the BSP made a downward adjustment on its inflation forecast for the year at 5.4%, slightly lower than the 5.5% previously announced.Medalla said they expect the inflation rate to further drop below 4% “before the end of the year unless another shock happens.
