BSP seen matching Fed’s mega hike

The Bangko Sentral ng Pilipinas is increasingly likely to make good on its promise to deliver another 75-basis-point rate increase this week, economists said on Sunday.

In addition, BSP may keep matching the Federal Reserve’s subsequent rate increases should domestic inflation stays high.

BSP Governor Felipe Medalla had announced that he would “match” the US Federal Reserve’s policy rate by the same amount two weeks before the scheduled meeting with the Monetary Board.

Medalla also explained last Friday that raising interest rates by 75 basis points was necessary to “bring inflation back” to its goal next year.

 225 bps increase thus far

The Monetary Board has so far increased the benchmark interest rate by a total of 225 bps.

“Governor Felipe Medalla pre-announced his intention to match any rate hike by the US Federal Reserve and will likely make good on that promise to push the policy rate to 5.0 percent (this week),” ING Bank N.V. wrote on its website.

For his part, Rizal Commercial Banking Corp. chief economist Michael Ricafort told Daily Tribune that Medalla’s recent signals and reiterations that prospective local policy rate hikes could still match any future Fed rate hikes if inflation remains high would still help support and stabilize the peso exchange rate and overall inflation, alongside other measures.

President Ferdinand “Bongbong” Marcos Jr. already signaled higher interest rates to tame inflation and support the Philippine peso, which Ricafort said is “the administration’s priority.”

“Still, the relatively weaker peso in recent months (and high inflation rate) could still increase the possibility of further local policy rate hikes,” Ricafort added.

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